The three-men expert committee was constituted by Irda in September to examine issues pertaining to practice of special discount and remuneration for brokers and agents. It had been asked to submit an interim report dealing the special discount by October 31 and the final report by year-end.
The committee has since held meetings with various stakeholders in Delhi, Mumbai, Chennai and Kolkata.
The move came in the wake of conflicting notices issued by Irda in May and then July regarding remuneration payable to brokers, including the special discount of 5 per cent on government and public sector business. The contradictory stands by Irda raised the hackles of brokers, who have been threatening to move court against the change of terms after they were issued licences.
In May, Irda stated, with effect from June 15, 2003, the facility of discount of 5 per cent in lieu of commission/brokerage on the face of the insurance policy available in case of all classes of business to non public sector entities shall stand withdrawn, and all general insurers may initiate steps to inform their clients accordingly.
It went on to add that in respect of business emanating from public sector undertakings ... no brokerage or commission will be paid. The insurance companies can if they so choose grant a 5% discount on the face of the policy.
In respect of all other businesses, it said Regulation (19) would apply, which has laid down individual limits on payment of brokerage on general insurance business (on tariff as well as non-tariff) and also life insurance, annuity, group insurance, pension schemes, etc. The limits would be the maximum brokerage that would be payable by an insurer.
However, this order was succeeded by another notification, issued on June 9, in order to clarify that insurance brokers could service the non-tariff portfolio of public sector entities, and only the tariff portion of the business shall continue to remain out of the scope of the activities of an insurance broker.