Bentota (Colombo), July 30: The regulator may frown on the practice, but insurers want the practice of rebating legalised.
The regulator has reviled the practice of rebating — where insurance agents pass on a part of the commission to lure customers — and has ordered them to stop it. It has even started promotional campaigns to educate the consumers about the dangers of rebating.
However, the industry is less convinced about the need for an outright ban.
“I don’t think there is anything wrong with rebating. Why should a person not be entitled to make enough earnings if he is giving valuable financial suggestions to his clients' It is quite allowed in the developed markets,” said Stuart Purdy, managing director, Aviva Life Insurance, India at the second day of the insurance summit.
Expressing dissapointment over the practice of filing complete strategic details with the insurance regulator, Purdy said, “The IRDA has always wanted to know strategic details which include competitive and sensitive information. This is not what happens in the developed countries.”
Speaking at the summit, Sampad Bhattacharya of Watson Wyatt, insurance consultants, observed that there were a number of underlying assumptions that went into the design and pricing of an insurance product. These include perceptions of investment returns, mortality, expenses and profitability.
Explaining in greater detail the pricing assumptions of any insurance product, Bhattacharya said investment return, mortality rate, lapses/withdrawls and administrative expenses need to be seriously considered by an insurer specially in the light of market competition.