Insurance watchdog IRDAI's proposed overhaul of the distribution practices in the industry may lead to up to a 70 per cent fall in revenues for intermediaries and may lead to 10 lakh job losses, the Insurance Brokers Association of India (IBAI) said on Tuesday.
The body, which has over 800 members, warned that implementing the proposals mentioned in the consultation paper titled 'Recalibrating Economics of Insurance Distribution' will also lead to job losses at insurance companies and also dent the long-term ambitions of increasing insurance penetration.
It can be noted that the Insurance Development and Regulatory Authority of India (IRDAI) released the consultation paper on September 23, leading to widespread concerns about the impact on insurers and intermediaries because of the policy being undertaken to help customers.
The consultation paper set out a comprehensive framework of reforms covering insurance distribution, its structure, expenses, commissions, market conduct, transparency and leveraging digital infrastructure.
"The industry will lose up to 70 per cent of the revenues and proposals will lead to 10 lakh job losses on a conservative basis," IBAI's director Pavanjit Singh Dhingra told reporters here.
He added that the deadline for submitting feedback was far too tight and urged to extend it by over two months up to December this year.
Following the paper's release, IRDAI Chief Ajay Seth defended the proposed changes, citing excessively high commissions earned by insurers.
IBAI officials said they agree with the objectives the regulator seeks to achieve from the paper, and added that the body will be meeting the regulator on Friday to voice their concerns.
The body wants the Irdai to relook at its proposals including removal of the distinction between agent and broker, and officials stressed that having a broker in the picture is a globally accepted practice useful especially during filing of claism.
"The proposed architecture doesn't exist anywhere else in the world. There will be intended and unintended consequences because of it," Dhingra added.
When asked about the sharp growth in commissions over the last few years, the body's president Narendra Bharindwal said till a few years ago, part of the commissions used to pass off as marketing expenses and hence, the numbers are not comparable.
