Kathmandu. Life insurers are reluctant to make provisions regarding incentives implemented through the Insurance Regulations 2081.
There is a provision in the regulation to distribute incisives based on the renewal rate of the policy. Contrary to such provisions, the insurer is providing the full amount of incentive as before, ignoring the renewal rate of the insurance policy sold by the agent in the past.
Rule 44 of the Insurance Rules 2081 contains provisions related to the agent’s commission and incentive. Sub-rule 3 of this regulation provides that while providing the incentive amount, the amount referred to in Schedule 10 should be deducted on the basis of the renewal ratio of the policy issued by each agent.
Life insurers are reluctant to implement such provisions of the regulations. Due to pressure from agents, life insurers are slow to implement this provision. Some insurers, though partially implemented, are still in a ‘wait and watch’ situation.
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# Provisions relating to incentives related to Rule 44 of Insurance Rules 2081#[/caption]
In order to discourage the agent who is weak in the renewal rate of the policy and to encourage the business agent, a provision has been made to determine the amount of incentive based on the service after the sale of the policy and the renewal rate.
There is a provision to deduct 20 percent of the incentive of agents whose renewal rate is less than 30 percent and 15 percent of agents who are less than 45 percent. Similarly, 10 percent incentive will be deducted for agents up to 60 percent and 5 percent for agents with renewal rate of 60 to 75 percent.
Any incentive should be decided on the basis of excellence in the performance of the concerned individual or group. In the life insurance sector, the rate of expiry or surrender was high as the first insurance premium was distributed only on the basis of income, rather than on the basis of performance excellence in agent incentives.
According to the sources concerned, the incentives are being distributed without deduction on the basis of an informal agreement to implement the provisions related to the cut only after mid-June as they have threatened not to work if the incentive is cut. As the end of the fiscal year is approaching and the provisions of the regulations are also coming into force only from March 15, they are expecting a compensation from the Nepal Insurance Authority by not implementing the provision for this fiscal year.
The general insured has to suffer due to the tendency to provide life insurance completely ignoring the level of income of the insured, the stability of the income source, the nature of the income source and the ability to save. The new incentive provision is expected to not only provide after-sales service to senior agents and agency managers in regular contact with their old insurers, but also encourage the newly entrant agents to go to the doorstep of the insured continuously for after-sales service.
To ensure renewal rates, the insurer is developing an automated system to track the renewal rate of the policies sold by the concerned agent and his subordinate agent in the life insurance software. They said that it may take some time to build the software as this work has to be implemented according to the conditions rather than the normal situation.
