What was being done in a clandestine manner by the industry players, the the Insurance Regulatory and Development Authority of India (IRDAI) has legalised the same with the new norms, said a senior industry official.
The official also said the new norms will affect adversely the government owned general insurers and an advantage for mid and large sized private insurers.
The IRDAI had recently notified its regulations whereby, the policy segment wise ceiling on commissions payable to the distributors has been abolished.
As per the new regulations, there will be only one ceiling, that is the Expenses of the Management and insurers' spend has to be within that ceiling.
"In the case of general insurance companies the Expenses of the Management is freezed at 30 per cent and for stand alone health insurers it is 35 per cent," the official told IANS.
The official also said, earlier the private companies have been paying their distributors over and above the specified limits. Now, the new regulations have legalised the same.
"No more the insurance companies -- life and general insurers -- will get notices from the Goods and Services Tax (GST) Authority," the official said.
Industry officials have told IANS that the insurers -- life and non-life -- have been paying their product distributors over and above what has been prescribed under various heads.
Incidentally, last year saw the GST Authority alleging 16 insurers misappropriating a whopping Rs 824 crore of input tax credit using their intermediaries to issue fake invoices.
The IRDAI has also penalised several insurers in the past for violating the commission payment norms.
Industry officials told IANS that the government insurers have high wage costs and hence will have little leeway in increasing the payout to their distributors as compared to the private sector players.