The findings come days after the Insurance Regulatory and Development Authority of India (IRDAI) released a consultation paper proposing changes to insurance distribution, including product- and channel-specific commission limits, lower Expenses of Management (EoM) limits for insurers and measures to address mis-selling.
The regulator has invited comments from stakeholders and the public until October 25.
The LocalCircles survey received more than 94,000 responses from insurance buyers across 322 districts.
The survey found that 86% of respondents said they had not been informed about the commission their agent or distributor would receive from the insurer before buying a policy.
Only 3% said they had been fully informed about the commission, while 8% said they were partially informed and 3% could not recall. This question received 23,690 responses.
On commission disclosure, 82% of respondents said insurers should be required to disclose the commission being paid to agents or distributors before the purchase of any insurance policy.
Another 6% supported disclosure for life and health policies, while 10% did not support such disclosure and 2% could not say. The question received 23,003 responses.
The survey also examined consumers’ experience with policy recommendations. Half of the respondents said insurance agents or distributors had frequently recommended a policy without clearly explaining why it was suitable for them. Another 24% said this had happened sometimes.
IRDAI’s consultation paper proposes that commission limits should vary depending on the insurance segment, line of business, distribution channel, product complexity and the effort involved in selling and servicing a product.
For individual life products, the proposed commission limits vary according to the premium payment term and distribution channel.
For individual pure-term policies, the paper proposes first-year commissions of 25% for intermediaries and 30% for agents, with renewal commissions of 7.5% and 10%, respectively. For individual health insurance, first-year commissions of around 15% for distribution entities and 20% for agents have been proposed, with renewal commissions of 5% and 10%, respectively.
The consultation paper also proposes changes to insurers’ EoM limits. Life insurers would be required to bring company-level EoM down to 15% of gross direct premium income within two years and 12.5% within five years, while general insurers’ EoM limit would be reduced from 30% to 20% over five years.
On transparency and mis-selling, IRDAI has proposed disclosure of commission policies and structures by insurers and large distributors, along with measures covering remuneration, seller-level traceability and clawback of commissions in cases of mis-selling.
However, the proposed framework does not provide for commission disclosure to individual buyers at the policy level for all retail products. The consultation paper proposes such disclosure for specified commercial policies, according to the LocalCircles release.
The survey also found that 71% of respondents supported limiting distributor commissions if this helps reduce insurance premiums. Another 19% said they would support commission limits provided service quality is not affected, while 8% opposed the move and 2% could not say.
The survey question received 24,082 responses.
LocalCircles said it will submit the findings to IRDAI as part of the consultation process. The survey was conducted through the LocalCircles platform, with respondents drawn from 322 districts; 69% of respondents were men and 31% women.