Circular on Payment of Commission, remuneration, rewards and distribution f

To All Insurers, Insurance Intermediaries Insurance Agents • JI~ 1t1<Jtq iii., filf.N1ii,.; JR m ~118¥<•1 atwt4¥1 INSURANCE REGULATORY AND ir.iai DEVELOPMENT AUTHORITY OF INDIA IRDA/ INT/ CIR/ Comm/ 139/ 08/ 2018 29th August, 2018 Circular on Payment of Commission, remuneration, rewards and distribution fees under Long Term Motor Insurance Policies Reference is drawn to the recent Supreme Court judgement on Writ Petition No. 295 of 2012 in the case of S. Rajaseekaran vs Union of India and others which states as under: "i) It shall be mandatory for all General Insurance Companies to issue a three year third party insurance cover for new cars and five year third party insurance cover for new two wheelers as a separate product or as part of a comprehensive insurance product. !RDA should issue instructions accordingly to all General Insurance Companies. ii) The GIG and /RDA should ensure that the legacy insurance data is also shared with MoRTH as soon as possible for its integration with Vahan data. iii) /RDA should ensure that all General Insurers follow its directions dated 01.01.2018 advising them to make available the third party insurance cover to all proposers on on!ine channels; liaise with police authorities to facilitate issue and renewal of third party insurance cover and ensure its easy availability." In light of the above, it is expected the Authority will issue necessary guidance on the commission, remuneration and rewards that shall be paid for long term policies. 1 ~ 'f. 115/1,_ ~ ~. rtlrtifi(IA'J:SI , ~-50~ 032, 'qffif I Survey No. 115/1, Financial District, Nanakramguda, Hyderabad-SQQ 032, India 6) . +91-40-2020 4000 ~ : www.irda1.gov.1n 6) : +91-40-2020 4000 Website : www.irdai.gov.in Currently in the motor segment there are two types of policies namely: a) Stand-alone Motor TP policy and b) Motor Package Insurance policy for 2-wheelers and Private Cars. Rationale for proposed commission, remuneration, rewards and distribution fees for Long Term Motor Insurance Policies Following discussions with the General Insurance Council and based on the Report of the Internal Group to examine framework for Long term products in General Insurance the following new motor insurance products are permitted in the general insurance market in the country: i) 5 years Long term Stand-Alone motor Third Party Insurance Policy for new 2 - wheelers ii) 3 years Long term Stand-Alone motor Third Party Insurance Policy for new Private Cars iii) 5 years Long term Motor Package Insurance Policy for new 2 - wheelers iv) 3 years Long term Motor Package Insurance Policy for new Private Cars v) Bundled cover with one year term for own damage and 5 years motor third party insurance policy for new 2 - wheelers vi) Bundled cover with one year term for own damage and 3 years motor third party insurance policy for new private cars Commission, Remuneration, Reward and Distribution Fees for Long Term Motor Insurance Policies: Therefore, taking into account the need to protect the policyholders from payment of higher premiums and balance the earnings of insurance agents I insurance intermediaries, the Authority proposes the following commission, remuneration and rewards to the insurance agents and insurance intermediaries under the powers vested with the Chairman, IRDA under Section 14 of the IRDA Act and regulations made thereunder: 2 S.No. Types of Long Term Motor Max Commission/ Maximum Distribution Fees for Insurance Policies remuneration payable to Rewards MISP insurance agents/ insurance intermediaries 1 5 years Long term Stand- Nil Nil Nil Alone Motor Third Party Insurance Policy (L TSAMTIP) for new 2 - wheelers 2 3 years Long term Stand- Nil Nil Nil Alone Motor Third Party Insurance Policy (L TSAMTIP) for new Private Car 3 5 years Long term Motor i) 1st year of 5 years 30% of i) 1st year of 5 years Package Insurance Policy LTMPIP-17.5% (OD commission/ L TMPIP - 22.5% (OD (L TMPIP) for new 2 - portion) + (Nil-TP remuneration portion) + (Nil-TP wheelers Portion) per policy Portion) ii) 2nd year of 5 years ii) 2nd year of 5 years LTMPIP - 10% (OD LTMPIP - 13% (OD portion) + (Nil-TP portion)+ (Nil-TP Portion) Portion) iii) 3rd year of 5 years iii) 3rd year of 5 years L TMPIP - 10% (OD L TMPIP - 13% (OD portion) + (Nil-TP portion) + (Nil-TP Portion) Portion) iv) 4th year of 5 years iv) 4th year of 5 years LTMPIP - 5% (OD L TMPIP - 6.5% (OD portion) + (Nil-TP portion) + (Nil-TP Portion) Portion) v) 5th year of 5 years v) 5th year of 5 years L TMPIP - 5% (OD L TMPIP - 6.5% (OD portion) + (Nil-TP portion) + (Nil-TP Portion) Portion) 4 3 years Long term Motor i) 1st year of 3 years 30% of i) 1st year of 3 years Package Insurance Policy LTMPIP - 15% (OD commission/ L TMPIP - 19.5% (OD (L TMPIP) for new private portion) + (Nil-TP remuneration portion) + (Nil-TP car Portion) per policy Portion) ii) 2nd year of 3 years ii) 2nd year Of 3 years L TMPIP - 10% (OD L TMPIP - 13% (OD portion) + (Nil-TP portion)+ (Nil-TP Portion) Portion) iii) 3rd year of 3 years iii) 3rd year of 3 years L TMPIP - 5% (OD L TMPIP - 6.5% (OD portion) + (Nil-TP portion)+ (Nil-TP Portion) Portion) 5 Bundled cover with one Bundled cover- 17.5% 30% of Bundled cover - 22.5% year term for own damage (OD portion) + (Nil-TP commission/ (OD portion) + (Nil-TP and 5 years motor third Portion) remuneration Portion) per policy 3 6 party insurance policy for new 2 - wheelers Bundled cover with one Bundled cover - 15% (OD 30% of Bundled cover - 19.5% year term for own damage portion) + (Nil-TP Portion) commission/ (OD portion) + (Nil-TP and 3 years motor third remuner tion Portion) party insurance policy for per policy new private car Also the commission, remuneration, reward and distribution fees shall be paid in the year the premium is booked. ft=, <71 <P ~ Sujay Banarji Member (Distn) 4