The Insurance Development and Regulatory Authority (Idra) is abolishing the commission system for individual agents in the non-life or general insurance sector.
A notification in this regard will be issued soon. Once the notification comes into effect, non-life insurance companies will no longer be able to pay any commission to individual agents on premiums.
On Monday (December 1), Idra gave this instruction in a letter sent to the Bangladesh Insurance Association (BIA) and the CEOs of all non-life insurance companies in the country.
At the same time, the decision to suspend the licences of all individual agents was also informed.
The companies will have to send the list of individual agents to Idra by December 5.
According to the information received, in a joint meeting held on November 25 with the CEOs of Idra, BIA, and non-life insurance companies, it was decided to reduce the commission to zero percent and suspend the licenses of individual agents.
BIA has been instructed to form a vigilance team to assist Idra in implementing the decision to reduce individual-agent commission to zero percent.
If any company violates the directive, the vigilance team will inform Idra, and Idra will take action under the Insurance Act.
Till now, individual agents were given up to 15% commission on premiums within the legal framework.
However, according to industry stakeholders, in reality, many companies would compete to win business by offering higher commissions.
This not only increased unhealthy competition but also reduced the company’s income and profits as a large part of the premium went out as commission.
In addition, in many organizations, unscrupulous entrepreneurs and officials misused agent commissions to divert company money in other ways.
Industry experts say that if the individual-agent commission is abolished, a major avenue of long-standing irregularities in the non-life insurance sector will be closed.
This will increase the transparency of income and expenditure and will have a positive impact on the actual income and profits of the companies.
