The Authority has been in
receipt of representations from various interests such as insurers,
insurance consumers, field officers of insurers, chambers of commerce
and Members of Parliament on its Notification/Order dated 30/05/2003
which modified its earlier notification of 22/03/2003. The impugned
notification was made effective from 15/06/2003 and it withdrew the
facility of 5% discount earlier being paid in all classes of business
to non-public sector entities and also stopped brokerage or commission
payment in respect of business emanating from public sector undertakings
(defined as Government companies under Companies Act). The insurer,
in the later case was permitted to grant 5% discount on the face of
the policy if he so chooses.
We examined the representations
and concerns shown on the subject and decided to keep the said notification
under abeyance with immediate effect and issued orders to that effect
vide notification dated 16/07/2003. Since, the subject in question relates
not only to special discount, agency commission, brokers' remuneration,
differential rates/scales of procurement of insurance business, rebates
etc but to wider range of issues, it has been decided to constitute
the following Expert Committee with immediate effect to deliberate on
the enclosed Terms of Reference with all the relevant
sections and parties interested to the said terms.
1) Shri A.C. Mukherjee, Chairman
of the Committee
2) Shri K.N. Bhandari, Member
3) Shri G.V. Rao, Member
The committee is requested
to furnish its recommendations by 31/10/2003 in respect of Term No.1
and for the remaining terms by 31/12/2003 to enable the Authority to
take appropriate decision to protect the interests of policyholders
and for orderly development of insurance market.
The Chairman and members of this committee will be paid a sitting fee
or Rs. 1000/- and conveyance of Rs. 400/- per day in addition to reimbursement
or payment of expenses towards their stay and air travel (economy class)
at the venue of the meetings and usual telephone expenses incurred in
connection with the conduct of business on the terms of reference.
Secretarial services
to the committee would be provided by the Authority. The Committee shall
have its headquarters in Hyderabad and may hold meetings at other centres
within India. Mr. Prabodh Chander, Executive Director and Mr. Arup Chatterjee,
Deputy Director would be the nodal officers of the Authority to coordinate
and provide necessary assistance to the committee.
(C.S. Rao)
Chairman
Copy to:
1) Shri A.C. Mukherjee, Chairman
of the Committee; Address: 10/2, Hungerfort Street, Kolkata 700 017
2) Shri K.N. Bhandari, Member; Address: 5, New Power House Road, Jodhpur-342
003
3) Shri G.V. Rao, Member; Address: 106, Shanti Nagar,
Hyderabad-500 028
4) Shri Prabodh Chander, Executive Director and Shri Arup Chatterjee,
Deputy Director, IRDA
5) CEOs of all Non-life Insurance Companies - with a request to render
the necessary cooperation, assistance and have interaction with the
committee on a priority basis for better market conduct to be practiced.
(C.S. Rao)
Chairman
Expert Committee to examine remuneration system
For insurance brokers, agents etc. in general insurance business
Terms of Reference
1st September, 2003
1. To make specific recommendations:
whether the 5% discount in
lieu of agency commission and remuneration presently enjoyed by the
certain segment of policyholders should continue or discontinue or modify
in any other form in the interest of future growth of insurance market.
Whether any special dispensation is required to be given for Government
, PSUs and Corporate Clients.
Whether there should be linkage of this discount/commission/remuneration
with the paid up capital concept of the insured.
Whether the kind of commission/remuneration encourages rebate and its
effects on business development and procurement cost as compared to
the services to be rendered by the intermediaries.
Whether there should be a differential rate of Commission/remuneration
to agents/brokers in general and with special reference to health insurance,
personal lines, social and rural sector insurance business.
2. To examine the role of
intermediaries viz. Agents and brokers in the current insurance market
scenario and to make suitable recommendations -
clarifying their utility to the future growth of the insurance industry
in spreading risk awareness and widening the customer base in respect
of both tariff and non-tariff business.
On the value added services to be provided to justify compensation received
in terms of commission and brokerage.
On the regulatory safeguards to be considered to eliminate unhealthy
practices of rebating and other undesirable market practices inhibiting
competition by fair means.
3. To examine the feasibility of referral fee/charges arrangements in
the context of Co-operatives, Panchayats, Banks, NGOs and other such
marketing intermediaries while specifying their role and duties.
4. If any legislative / regulatory changes are needed in pursuit of
the objectives.
5. Any other matter as the committee may consider relevant for the market
conduct and long term development of the distribution channels by creating
an efficient and viable intermediary channel-mix in the best interests
of the future growth of the market, the insurers and the insuring public.
(C. S. Rao)
Chairman