Commission for life insurance agents could be revised

PETALING JAYA: The commission structure for life insurance agents, which is currently capped, could be revised in line with other countries such as Singapore and Hong Kong.

It is learnt that revising up the commission structure was one of the areas that Bank Negara was looking into in its concept paper for an improved framework for the life and takaful insurance sectors.

“Discussions are still ongoing on the matter between the industry and the central bank,” said an industry official.

The current commission structure in Malaysia is capped at 171% payable over six years for traditional insurance plans and 160% payable over the same period for investment-linked insurance products.

Of the 171%, 110% goes to agent as basic commission and the balance for unit and district managers, etc.

At this juncture, it is still unclear by how much the limit on commission would be revised. As of June 30, the total number of agents in the life insurance sector stood at 82,444.

According to industry observers, the move to revise the commission structure of life insurance agents would enable them to move more easily from one company to another without much constraint.

At the moment, an industry player said there was hardly any movement of agents within the industry, adding that this was due to the fear of losing out or foregoing their commission in the event they joined a new company.

AIA Bhd chief executive officer Bill Lisle told StarBiz that in the event of the commission of agents being revised, there should be firstly clear guidelines on the amount to be paid when an agent joins a new company.

“For example, in Singapore the authorities have capped the commission of agents to a maximum 150%. This is the figure which has to be paid when an agent joins a new company upon leaving his previous company. The island republic has done this successfully.

“Though the 150% figure sounds big, in reality it is not as there will still be some amount of commission which will be outstanding.

“Allowing agents to move should be balanced with consumer protection. There should be guidelines to ensure consumers are adequately protected. We are supportive of the move but at the same time by allowing insurance agents to move more easily via revising the commission limit, among others, should not put customers at a disadvantage,’’ he added.

Lisle said that compared with Singapore, Hong Kong was more liberalised as there were more movement of agents due to greater flexibility in the commission structure and was not regulated unlike Malaysia.

An industry player said he did not foresee any major deviation from the current norm as any major increase in commission terms would invariably result in an increase in price which would render a product to become uncompetitive.

However, flexibility in commission terms would allow insurers to reward good and loyal agents, he noted.

On another proposal in the concept paper of having full-time agents, Lisle said the central bank’s move was in the right direction to enhance the level professionalism in the industry.

Unlike Hong Kong, Singapore and South Korea, which have about 90% full-time agents, Malaysia was a far cry with about 40%, he noted.

He felt that productivity should be key in defining a full-time agent as there were cases where part-time agents were more productive than those who work full time.