KATHMANDU, AUG 12:
Insurance agents and insurers are trying to get the regulator to revoke the cap on incentives, but the insurance regulator is unlikely to oblige.
“We are holding discussions with insurance companies to figure out the best possible way so that thousands of agents do not suffer,” said secretary of Life Insurance Agents Association of Nepal Krishna Prasad Acharya.
Starting from the current fiscal year, the Insurance Board (IB) had dictated that incentives being provided to insurance agents along with business promotion should be limited to a maximum of six per cent of the annual gross premium income.
Calling the cap on their incentives impractical, the life insurance agents have stopped taking new clients as a protest against such limitations. “However, we are yet to call for a widespread strike. At present, agents are not taking any new clients voluntarily to express their discontent, but if things do not work out we might opt for a strike,” pointed out Acharya.
“Though not all agents have stopped selling policies, the number of policy sales has
definitely been affected due to the ongoing protest,” said chief executive of PrimeLife Insurance Company Restha Jha.
The insurance regulator capped the incentives being doled out by insurance
companies to their agents to bring down the expenses of the firms, as the financial burden had started to strain their income.
“We decided to cap the incentive, especially, to curb the tendency of agency system that hires sub-agencies to bring in more clients. Such a multi-layered agency system had resulted in companies
paying more to the agencies besides the commission,” said chairman of IB Prof Dr Fatta
Bahadur KC.
Though the general agency system for insurance marketing is widely accepted worldwide, the regulator is wary about increasing costs to maintain such insurance agents.
IB has already fixed the commission rate that agents can be paid based on the maturity period and type of policies ranging from 10 per cent to 25 per cent of the total premium amount. In addition to the commission rate, the insurance companies have been paying more as incentives mostly to retain the agents.
“In some cases, companies were found to have spent 92 per cent of the first year’s premium income to pay for agents, and if this trend persists, companies will be in trouble in the long run,” he added.
There are about 90,000 licensed insurance agents working in the Nepali life insurance market for nine life insurance companies, along with about 1000 non-life insurance agents.
Source: THT
Insurance agents and insurers are trying to get the regulator to revoke the cap on incentives, but the insurance regulator is unlikely to oblige.
“We are holding discussions with insurance companies to figure out the best possible way so that thousands of agents do not suffer,” said secretary of Life Insurance Agents Association of Nepal Krishna Prasad Acharya.
Starting from the current fiscal year, the Insurance Board (IB) had dictated that incentives being provided to insurance agents along with business promotion should be limited to a maximum of six per cent of the annual gross premium income.
Calling the cap on their incentives impractical, the life insurance agents have stopped taking new clients as a protest against such limitations. “However, we are yet to call for a widespread strike. At present, agents are not taking any new clients voluntarily to express their discontent, but if things do not work out we might opt for a strike,” pointed out Acharya.
“Though not all agents have stopped selling policies, the number of policy sales has
definitely been affected due to the ongoing protest,” said chief executive of PrimeLife Insurance Company Restha Jha.
The insurance regulator capped the incentives being doled out by insurance
companies to their agents to bring down the expenses of the firms, as the financial burden had started to strain their income.
“We decided to cap the incentive, especially, to curb the tendency of agency system that hires sub-agencies to bring in more clients. Such a multi-layered agency system had resulted in companies
paying more to the agencies besides the commission,” said chairman of IB Prof Dr Fatta
Bahadur KC.
Though the general agency system for insurance marketing is widely accepted worldwide, the regulator is wary about increasing costs to maintain such insurance agents.
IB has already fixed the commission rate that agents can be paid based on the maturity period and type of policies ranging from 10 per cent to 25 per cent of the total premium amount. In addition to the commission rate, the insurance companies have been paying more as incentives mostly to retain the agents.
“In some cases, companies were found to have spent 92 per cent of the first year’s premium income to pay for agents, and if this trend persists, companies will be in trouble in the long run,” he added.
There are about 90,000 licensed insurance agents working in the Nepali life insurance market for nine life insurance companies, along with about 1000 non-life insurance agents.
Source: THT
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