Court stays IB's diktat to slash agent fee

KATHMANDU:

The insurance sector regulator has been directed to stall the enforcement of the new commission rate of non-life insurance agents by the court.

The Insurance Board (IB) had slashed the commission of non-life insurance agents by one-third in January. However, insurance agents had lodged a case to overturn the regulator’s move at the Patan Appellate Court. The court has stayed the reduction in agents’ fee till the final court verdict.

“As per the court’s order, IB will not enforce the new commission regime until the court gives a final decision on the case,” informed director at IB Shreeman Karki.

IB had determined the new commission for non-life insurance agents effective from January 15. Non-life

insurance agents were to be paid a maximum of five per cent commission on the premium of policy issued. Earlier, the commission rate stood at 15 per cent.

“IB had taken the decision to lower the commission rate after extensive consultations with all stakeholders —

insurers and policy holders — but since the court has given a stay order on the commission cut, we have to wait till the conclusion of the case,” added Karki.

The new rate, however, was not applicable on all types of non-life insurance policies as the old rate was still applicable on third-party liability vehicle insurance, and crop and livestock insurance.

To further sideline the role of agents in the non-life insurance market, the regulator had further offered 10 per cent discount on the amount equivalent to agents’ commission to clients who buy policies directly from the insurer.

Back then, IB had cited that a large number of dummy agents were getting commissions although their role in bringing in clients is non-existent. The dummy agents were put in place by the insurance companies’ staff and promoters only to receive commission despite having no role whatsoever. The slashing of agent commission also aimed at reducing the cost to the insurance company.

In addition, insurance companies have also been advocating to do away with non-life agents due to the presence of marketing departments in companies, which are responsible for bringing clients.

Source: THT