Quick Summary
Several private insurers in India have reduced distributor payouts by 15-18% to offset losses from the removal of Input Tax Credit (ITC) under GST, prompting industry associations and agents to escalate the issue with IRDAI and the Finance Ministry. Industry insiders warn that the current GST frame
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FAQ :
Private insurers are reducing payouts by 15-18% to offset increased operating costs resulting from the removal of Input Tax Credit (ITC) under GST. They can no longer claim tax credits on expenses like rent, technology, and commissions.
Distributors, including agents and brokers, will now have to bear the 18% GST cost on their commissions. This reduces their take-home income and can affect their working capital, especially for smaller, independent operators.
No, public sector insurers like LIC and others are reportedly maintaining their existing commission structures and absorbing the ITC loss. LIC plans to offset the impact through higher policy sales and new product pricing.
Industry associations and agents have escalated the issue with the IRDAI and the Finance Ministry. The IRDAI is likely to review the impact of GST ITC changes on insurance distributor payouts.
By reducing the income of distributors, particularly in smaller towns and rural areas, the changes could hinder morale and viability, potentially impacting insurance penetration and the government's goal of achieving 'Insurance for All by 2047'.
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