COMMISSIONS ARE NECESSARY TO SELL INSURANCE PRODUCTS
June, 03rd 2010
The turf between Securities & Exchange Board of India (Sebi) and Insurance Regulatory & Development Authority (Irda) has left life insurers waiting for more clarity on new product launches which could hurt their business this year. In an interaction, HDFC Standard Life MD & CEO Amitabh Chaudhry talks of ground realities.
How has Sebi-Irda spat over Ulips affected the industry?
So far, there has not been any major impact because it happened during the lean period. The existing customers haven't been hurt. However, there is a perception that distributors margins are high, which is not true. Customers believe that commissions will fall and so some maybe postponing their purchases. Secondly, there are talks that like mutual fund products, Ulips too should not attract entry load.
Currently, life insurers are holding back and we wonder why only 14 insurers have been singled out by Sebi when there are 23 players. Some changes have been made by Irda such as life covers for pension products and changes in the cap on surrender charges, and multi-level marketing are being considered.
What is your view on commissions?
Commissions are necessary to sell insurance products. Someone has to sit down and explain the product to the consumer, understanding his needs. To assume these products will be sold without a commission, which varies between 4% and 8% in case of Ulip products, is not comprehensible. Insurance is a long-term saving instrument and financial advisors need to be compensated. Irda has laid down guidelines on disclosures of commission. I believe that the two regulators will arrive at a conclusion soon.