Life Insurance Coporation (LIC) agents and other insurance agents, brokers and intermediaries are worried that a proposed overhaul of the insurance distribution system could sharply reduce their earnings and trigger large-scale job losses.
The Insurance Brokers Association of India (IBAI), which has more than 800 members, estimates that the proposed changes could wipe out up to 70 per cent of intermediaries’ revenues and result in 10 lakh job losses.
At the heart of the concern is a consultation paper released by the Insurance Regulatory and Development Authority of India (IRDAI) on September 23, titled ‘Recalibrating Economics of Insurance Distribution’. The paper proposes sweeping changes to the way insurance is distributed, covering commissions, expenses, market conduct, transparency and the use of digital infrastructure.
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For insurance agents and intermediaries, the proposed changes could therefore have a direct bearing on how they earn their livelihood.
“The industry will lose up to 70 per cent of the revenues and proposals will lead to 10 lakh job losses on a conservative basis,” IBAI director Pavanjit Singh Dhingra told reporters in Mumbai.
What exactly are agents worried about?
One of the key concerns is the proposed restructuring of the distribution architecture, including the removal of the distinction between an agent and a broker.
IBAI has urged IRDAI to reconsider this proposal, arguing that brokers perform an important role, particularly when customers have to file claims. The association said the proposed structure is not seen elsewhere in the world and could have both intended and unintended consequences.
The body has also questioned the sharp rise in commissions in recent years, pointing out that the way such expenses were classified has changed over time.
IBAI president Narendra Bharindwal said that, until a few years ago, a portion of what is now reflected as commissions was accounted for as marketing expenditure, making comparisons with current figures difficult.
Why is IRDAI proposing the changes?
The regulator’s stated objective is to recalibrate the economics of insurance distribution and make the system more transparent and customer-focused. IRDAI chairman Ajay Seth has defended the proposed changes, citing what he described as excessively high commissions earned by insurers.
IBAI said it agrees with the broader objectives of the regulator’s proposals but wants the impact on the distribution network to be examined more closely. The association is scheduled to meet IRDAI on Friday to present its concerns.
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It has also objected to the short window provided for feedback on the consultation paper and has sought an extension of more than two months, up to December.
For the insurance industry, the debate is therefore not merely about commissions. At stake, according to intermediaries, is the viability of a large distribution network and its role in expanding insurance coverage across the country.
With agency inputs