“Non-life insurers barred from using agents as IDRA scraps commissions”

The Insurance Development and Regulatory Authority (IDRA) has announced a sweeping regulatory reform in the non-life insurance sector, imposing a total ban on agent commissions and tightening controls over employee remuneration. The new rules, which will take effect from January next year, are intended to enhance governance, safeguard policyholders, and promote financial discipline within the industry.

In an official notification, IDRA stated that non-life insurance companies will no longer be permitted to conduct business through agents. Consequently, all forms of agent commission—direct or indirect—will be prohibited. The regulator emphasised that, under the Insurance Act of 2010, no insurance agent may pay or receive commission in the name of any individual or institution, with violations subject to strict regulatory action.

Beyond the abolition of commissions, the notification also clarified provisions regarding employee salaries and benefits. Salaries, allowances, and other remuneration for non-life insurance company officials must not be determined solely based on premium collection performance. Investment-related benefits, except those linked to risk-based investments, must align with the company’s approved service and investment policies. Moreover, all payments are required to be made via designated bank accounts; cash payments or other unauthorised methods will not be tolerated. Companies are also mandated to submit detailed quarterly statements reporting employee remuneration and associated benefits in a prescribed format.

Key Directives from IDRA Notification

IDRA’s decision reflects concerns over structural weaknesses in the non-life insurance market, where excessive reliance on commission-driven growth has often led to distorted pricing, poor risk assessment, and delayed claims settlements. Industry insiders note that prioritising premium volume over underwriting quality has long undermined policyholder protection.

While the transition may pose challenges for companies historically reliant on agent-driven sales, regulators view the reform as a long-term reset. By eliminating commission-based incentives and enforcing disciplined remuneration practices, the move aims to create a more sustainable, policyholder-focused insurance sector, ultimately strengthening public trust and financial stability.