Selling Insurance Products in India: The Commission versus Fee Debate
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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Abstract:
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The case discusses the commission versus fee debate related to the compensation structure of insurance agents in India. Though the issue was a long standing one, it sparked a fresh debate when the Swarup
Committee on Investor Awareness and Protection in 2009 proposed scrapping of the
agents' commission by 2011 stating that such a decision was necessary to protect
the interests of investors. The case discusses whether a fee-based model as
suggested by the committee would be viable in the Indian insurance market or
whether such a step was a premature one. The case points out the implications
the reform may have on the Indian insurance sector and presents the views of
regulators, investors, and agents on introducing a fee-based model for agents in
the insurance sector.
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While the industry and insurance agents strongly opposed the move, investors and some regulatory bodies supported the change.
The case concludes by analyzing whether the government's decision to continue with the commission-based system in the interest of insurance industry and financial intermediaries overlooked the investor's viewpoint.
Issues:
» Understand the issues and challenges in selling financial products such as insurance.
» Understand the compensation structure of the insurance agents in India and analyze the ramifications of the Swarup Commission recommendations.
» Analyze the advantages and disadvantages of a fee-based model as against the commission-based model.
» Evaluate the need for a change in the remuneration structure of a financial intermediary in Indian insurance sector.
Contents:
Keywords:
Marketing Financial products, Selling Financial Products, Compensation, Commissioned-based model, Fee-based model, Incentives, Investor awareness and protection, Mis-Selling, Insurance Penetration, Entry and exit loads, Insurance sector reforms, Swarup Committee, Insurance regulator, Indian insurance industry, Financial Well-Being Board of India (FINWEB), LIC
Selling Insurance Products in India: The Commission versus Fee Debate
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