Selling Insurance Products in India: The Commission versus Fee Debate

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Case Details:

Case Code : MKTG240
Case Length : 19 Pages
Period : 2008-2009
Pub Date : 2010
Teaching Note :Not Available
Organization : -
Industry : Insurance Industry
Countries : India

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Introduction Contd...

In September 2009, the D Swarup Committee on Investor Awareness and Protection (Swarup Committee) headed by Pension Fund Regulatory and Development Authority PFRDA⁶ Chairman D Swarup (D Swarup) proposed to scrap the upfront commissions paid to insurance agents.

The proposal was contained in a consultation paper released by the committee.

The paper titled 'Minimum Common Standards for Financial Advisors and Financial Education', recommended that the commission structure for the insurance sector should be phased out by April 2011 in favor of a fee-based system.

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Besides elimination of commission for insurance agents, the Swarup Committee also suggested setting up a regulatory system for financial advisers and a Financial Well-Being Board of India (FINWEB) to improve the level of financial literacy of Indian consumers with respect to financial products and services.

Commenting on the proposal, D Swarup said, "We have decided to stick to the April 2011 deadline for the phasing out of the commission structure in the insurance sector. The government can decide on the manner in which it has to be done after consulting the various stakeholders, including the insurance industry."⁷...

Excerpts >>

6] Established by the Government of India (GoI) on August 23, 2003, the Pension Fund Regulatory and Development Authority (PFRDA), is responsible for developing as well as managing the pension sector in India.
7] "Swarup Panel Sticks to Date on Scrapping Commissions," www.mydigitalfc.com, November 8, 2009.

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