A reason to smile

Venkatachari Jagannathan
30 December 2003

Chennai: The much-awaited report of Insurance Regulatory and Development Authority's (IRDA) expert committee to look into the remuneration of general insurance intermediaries is out — at last.

The three-member committee under the chairmanship of A C Mukherji (the other two members are G V Rao and K N Bhandari) has come out with a customer-friendly report that will stall any rate hike due to increased costs of inter-mediation.

The committee has recommended rationalisation of commission and brokerage rates paid to the intermediaries. In addition, the report also lays down the roadmap to dismantle the administered pricing regime that makes a mockery of the supposedly free market.

The report will also gladden the hearts of individual agents, a much-neglected segment for the past two-and-a-half decades. If the committee's views are to be accepted, it will throw open the doors to the corporate sector for them. Also, the agents can breathe freely and can compete with the brokers on the basis of their professional competency as the committee has recommended scaling down of brokerage rates.

As it is true that one cannot make everybody happy all the times, the broking community will be up in arms against the committee report. For, the committee has not only recommended rationalisation of brokerage rates in case of some business lines but also wants their principal officers to be professionally qualified. The report also calls for banning composite brokers (direct and reinsurance brokers), as they will not effectively serve the customer's interest.