Insurance cos pay Rs 18000cr as agent commission in FY10

Moneycontrol.com : Saturday, September 18, 2010 ;

Insurance companies paid out a staggering Rs 18,000 crore as agent commissions in financial year 2010. This is 17% higher than the FY09 payout. Interestingly, this surge has been driven largely by non-ULIPs, reports CNBC-TV18’s Avni Raja.

Unit-linked insurance products (ULIPs) seem to have taken a back seat over the last financial year. As per data available to Beware following an application to IRDA under the Right to Information Act, agent commissions paid on ULIPs have risen just 4% between FY09 and FY10, while commissions paid for traditional products has surged around 25%.

While this comes on the back of a 25% growth in the life insurance industry, experts say this huge difference in commission payouts suggests agents may have been relegating ULIPs to the back burner.

This is a clear change in strategy from the one employed two to three years ago, when ULIPs were driving industry growth. The argument is that with SEBI and IRDA fighting over ULIP regulation and IRDA tightening ULIP guidelines to make the products more transparent, insurance companies are pushing the less transparent, traditional products. Also to be noted is that IRDA has no plans to tighten guidelines for traditional products.

There may be another reason for this change in strategy. The new ULIP guidelines ask that commission amounts be specified upfront. And this has agents unhappy, since their earnings are capped. So the question doing the rounds is: is this shift in focus to traditional products a way to ensure that agents are kept happy ?