Irdai on Wednesday (May 22, 2024) proposed less upfront commission for better surrender value and premium of life insurance policies.
In a step that may give relief to a number of life insurers in India, insurance companies may soon increase trail commission for agents.
Trail commission means that the agent keeps getting a certain percentage of commission as long as the policy holder keeps paying the premiums.
Trail commission is quite popular in the mutual fund industry and ULIP.
Insurance Regulatory and Development Authority (IRDAI) may reduce the hefty upfront commission and increase the trail commission in the first year.
The new commission structure will reduce the front loading cost of life insurance companies, which may benefit the policy holder in the form of lower premium and better surrender value.
Other than that, policy persistence may increase.
The agent’s commission may also increase every year.
As a result of which, business of life insurance companies may also increase.
