Insurance Regulatory and Development Authority (IRDAI) has recently released revised consultation paper on expense of management and commission. According to this, the regulator has done away with the specific caps on commissions to agents and intermediaries that were earlier proposed in August.

It has now suggested that the commissions paid by insurance companies, both life and non-life, should not exceed the expense of management.

The proposed expensive management limit is 30 percent of gross premiums for life insurance companies and 35 percent of gross premiums for standalone health insurance companies.

This will come into effect from April 2023.

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Now what will it do for these companies?

It will give significant flexibility to insurers to plan their expenses. It will reduce the compliance efforts and cost and it will also have a lower probability of tax disputes.

It will also help companies like PB Fintech where it substantially reduces the regulatory risk for commission rates.

(Edited by : Anshul)