The Insurance Regulatory and Development Authority of India has announced principle-based commission rules that directly affect brokers handling group health and group personal accident portfolios.
The shift to a board-approved remuneration policy, anchored to Expense of Management thresholds, changes how commissions for group personal accident and wider personal accident insurance are negotiated, paid and disclosed. For employers, associations and brokers, the change is as much about governance and transparency as it is about pricing power.
What exactly has changed in broker commission rules
– IRDAI has moved from product-wise commission caps to a principle-led framework. The Payment of Commission Regulations 2023 allow insurers to set intermediary remuneration through a board-approved policy, subject to overall Expense of Management limits.
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– The framework applies across channels including brokers, corporate agents and other intermediaries, and covers group health, group personal accident and retail personal accident insurance.
– Insurers must ensure the remuneration policy is risk-based, fair to policyholders, and compliant with Section 41 of the Insurance Act that prohibits premium rebating.
– The new approach encourages better alignment between service quality, persistency, claim outcomes and pay, rather than a one-size-fits-all cap by product.
Readers can review the authority’s regulations and circulars on the IRDAI website at irdai.gov.in for the official texts and updates.
The regulatory base you should know
– Payment of Commission Regulations 2023: These regulations enable insurers to decide commissions and brokerage under a board-approved policy, within Expense of Management limits. The rules apply to all general and health insurers and cover personal accident insurance and group personal accident portfolios.
– Expenses of Management Regulations 2023: These define overall operating cost ceilings for general and health insurers. Commissions and brokerage form part of these costs and must not breach the specified limits at the entity level.
– Prohibition of rebates: Section 41 of the Insurance Act, 1938 bans offering or accepting any rebate of the premium or commission as an inducement. Rebating is a regulatory breach whether it relates to group health, group personal accident or retail personal accident insurance.
– Disclosure and fair conduct: Insurers must adopt transparent conduct of business. Remuneration to intermediaries should be defensible, disclosed to the proposer when required, and supported by documented services, especially in large group accounts.
In practice, this means commissions for group health and group personal accident are no longer governed by old caps. They are governed by limits and principles embedded in the insurer’s policy, which is in turn overseen by the board and IRDAI.
How the new rules affect group health policies
Group health is price sensitive in India and is often renewed annually through a competitive tender. Under the new commission regime:
– Remuneration structure: Brokerage for group health is determined by the insurer’s board-approved policy. It may vary by case size, complexity, claim experience and services committed by the broker.
– Pricing trade-offs: Insurers will balance brokerage against premium rates, because both sit within the insurer’s cost and profitability model. Employers may see cleaner bids that explicitly show premium and brokerage, and may negotiate both.
– Service-linked pay: Expect service-level linked remuneration. Broking scope can include benefit design, employee education, claims triage, wellness analytics and audit. Pay can be tied to delivery on these services.
– Controls on inducements: Any arrangement that resembles a premium rebate, cash-back or off-invoice inducement is prohibited. Benefits to the policyholder must be expressed through the policy, not through side arrangements.
For HR and procurement teams, this is an opportunity to formalise a scorecard-driven broker evaluation that recognises value beyond price, while maintaining tight governance.
What changes for group personal accident
Group personal accident is a fixed-benefit cover that pays a defined sum insured on accidental death or disablement. It often sits alongside group term life and group health. Under the new commission policy regime:
– Brokerage flexibility: As with group health, brokerage for group personal accident will be set under the insurer’s policy and can differ by industry risk, benefit design and claims record.
– Clarified roles: Brokers are expected to document their role in risk assessment, beneficiary data management, claim documentation and communication. Pay should reflect these deliverables.
– Transparent pricing: Employers can seek clean quotations that separate premium for group personal accident from any allied services. This improves comparison across insurers and supports audit trails.
– Consistency with personal accident insurance: Retail personal accident insurance will follow the same principle-based approach for commissions. Brokers must ensure no cross-subsidy or prohibited inducement between group personal accident and retail policies sold to employees.
This clarity helps buyers avoid hidden costs and keeps group personal accident programmes sustainable and compliant.
Pricing and negotiation under the new rules
Negotiations will change tone under the new regime.
– One-pie view: Insurers will view premium, brokerage and internal costs as one pie. A higher brokerage ask will usually need premium support or demonstrable service value.
– Multi-year stability: Where claim volatility is high, consider a service fee model alongside a reduced brokerage. It can stabilise costs in group health or group personal accident during tough cycles.
– Data quality: Clean member data, accurate sums insured and timely endorsements reduce administrative loads and claim friction. Insurers value this and may reflect it in both rates and brokerage.
– Market testing: For large programmes, consider a dual approach. Seek a lead insurer and a challenger quote from a second market without exhausting the entire market. This preserves long-term market appetite in personal accident insurance and group health.
Compliance checklist for brokers and buyers
– Ensure the insurer’s board-approved remuneration policy references group health, group personal accident and personal accident insurance explicitly.
– Map proposed brokerage or service fees to the policy bands and document the service scope.
– Avoid any arrangement that can be interpreted as premium rebating under Section 41.
– Keep all communications, meeting notes and service logs that evidence delivery and fair pay.
– Confirm GST treatment on brokerage or fees and ensure correct invoicing and TDS practices as applicable.
Market outlook for 2025
– Competitive intensity: Health inflation and accident frequency vary by sector, but competitive capacity remains available. Principle-based commission rules will reward data quality and service outcomes.
– Digital servicing: Adoption of digital onboarding, e-cards, cashless claim automation and app-based personal accident insurance claims will grow. Brokers that invest in these tools can substantiate remuneration.
– Product innovation: Expect modular add-ons in personal accident insurance, such as family transport, home modification and fracture covers, packaged for group personal accident. Clarity in wording and pricing will matter.
Common clarifications on broker remuneration
– Are commissions fixed: No. They are guided by the insurer’s board-approved policy and Expense of Management limits, and can vary by case and service scope.
– Can employers ask for disclosure: Yes. Employers can ask for disclosure of brokerage and any service fees. Brokers and insurers should provide clarity.
– Can benefits be funded from brokerage: Benefits must be part of the policy construct. Funding member benefits by rebating brokerage is not permitted.
– Can an insurer quote both net and gross: Yes, provided systems can support it and the arrangement is documented. Net-of-brokerage quotes are uncommon but possible for large, audit-sensitive accounts.
Conclusion
The regulator’s move to a principle-based commission framework is a structural change for group health and group personal accident. It promotes transparency, board oversight and service-linked pay, and it will influence how premiums and brokerage evolve over time. Employers and associations should embrace clean procurement, documentation and performance reviews, while brokers should anchor pay to tangible service delivery in both group personal accident and retail personal accident insurance. Done well, the new rules can deliver better outcomes for members, sustain cover quality and keep India’s group personal accident and broader personal accident insurance markets healthy and competitive.
