The Hindu Business Line : Decision on Swarup panel recommendations on Nov 5

New Delhi, Oct. 19 A decision on the controversial Swarup Committee report — which recommended doing away with the commission on financial products and services to agents by 2011 — would be taken on November 5.

Despite protests by insurance agents, the committee is tilted in favour of replacing the commission-based system with a fee-based one, sources told Business Line.

“We are not saying agents should not be paid at all or that their revenue stream should be totally cut off. We are only changing the revenue model of the agents.

“Currently, most individuals are not aware of how much of what they have paid to an agent while buying a policy is going into their account. A fee-based model will bring transparency regarding this,” a member of the committee on Investor Awareness and Protection said.

“As the main term of reference of the committee is investor protection, it will restrict itself to measures protecting the investors’ interests,” the official said.

The committee is led by Mr D. Swarup, Chairman, Pension Fund Regulatory and Development Authority.

“It is not right to say that consumers won’t be willing to pay any fees,” the official said, adding that the best agents will get the fees while the unscrupulous elements will be weeded out.

The committee said in 2007-08 lapsation rates of insurance policies ranged between 4 per cent and a shocking 80 per cent. It found that commissions paid to insurance agents were Rs 14,704 crore in 2007-08.

However, Life Insurance Agents Federation of India said in a letter to the panel that the recommendations “are baseless, imaginary and arbitrary and are against public interest and will be hampering the livelihood of 30 lakh life insurance agents in the country.”

“It is a matter of pity that the average income of the life insurance agents today is around Rs 60,000 per annum which is much below the salary of a class-IV employee,” the letter added.