3400 crores as agents commission in insurance business in one quarter

ENTERPRISE: Insurers Pay Rs 3,400 cr as Agent Commission

Commissions paid to insurance agents in the first quarter of 2010-11 dropped to 5.81 per cent of the total premium collection against 6.34 per cent previous year due to the cap on charges put by insurance regulator last year. In the March 2010, agents’ commission accounted for 6.72 per cent of the total premium collection.

According to data released by Life Insurance Council, a body of life insurance companies, Rs 3,398 crore was paid as commission to agents in April-June 2010 compared with Rs 2,995 crore paid in the corresponding period a year ago. The Insurance Regulatory and Development Authority (IRDA) had capped the net reduction in yield from unit-linked insurance plans (ULIPs) at 3 per cent.

The Life Ins
urance Council said in a statement that the full year’s impact of the cap would be felt in the current year and commissions would further come down with new regulations coming into force from September 1, 2010. Under the new norms, the net reduction in yield for policies with term less than or equal to 10 years should not be more than 3 per cent at maturity; for policies with term above 10 years, the net reduction in yield at maturity should not be more than 2.25 per cent.

Meanwhile, new business premium in April-June 2010 increased by 76.76 per cent to Rs 25,571 crore compared with Rs 14,466 crore a year ago. New business premium for linked products increased by 101 per cent to Rs 13,941 crore from Rs 6,935 crore previous year. New non-linked premium collection increased by 54.42 per cent to Rs 11,630 crore from Rs 7,531 crore.

Single-linked premiums showed a significant growth of over 220 per cent with premium collections going up to Rs 7,945 crore as against Rs 2,479 crore in the last fiscal.

Renewal premiums of linked-products grew 12.40 per cent to Rs 7,945 crore in June quarter as against Rs 7,047 crore last financial year. “This can be mainly attributed to the uncertainty that prevailed due to the ULIP controversy, prompting policyholders to defer there payments,” Life Insurance Council said.

Total renewal premium of the industry was, however, flat due to stagnation in renewal premiums of traditional policies where LIC is a dominant player.

Total premium of the industry grew by 24 per cent to Rs 58,508 crore during the first quarter against Rs 47,173 crore in previous year.