The Insurance Regulatory and Development Authority (IRDA) is set to push for an ordinance that will make selling term covers an attractive proposition for agents. A term cover is the cheapest and most effective life insurance cover without any extra returns on maturity. While such a product should be the sheet anchor for any life insurance need, it has never found favour with any stakeholders — insurers, their agents or investors.For insurers, the solvency margin (money to be set aside for capital adequacy) for term covers has till recently been 4 per cent, the same as that for, say, the extremely-popular unit-linked insurance plans (Ulips) that sells like hot cakes. For agents, the commissions (as a percentage of premium) are very low, since premium on term covers are very low. As for investors in India, most people buy a life cover for either tax saving purposes or look at it as an insurance-cum-investment tool. “Today, while purchasing an insurance product, the focus is more on what the buyer will get at maturity,” said financial planner Amar Pandit. At present, the Insurance Act prescribes a 40 per cent ceiling on commissions that life insurers can offer to agents. When contacted chairman of the insurance regulator IRDA, C S Rao, said, “In public interest, we are thinking of pushing for an ordinance that will do away with the cap on commissions for term covers.”
