The Insurance Development and Regulatory Authority (IDRA) has issued a circular with the aim of reducing the number of lapsed policies of the life insurance companies.
A policy for which all benefits to the policyholder cease and are terminated due to nonpayment of premium amount on due date or even after grace period is called a lapsed policy.
The insurance regulator on Sunday said this is one of the key impediments to raise insurance penetration rate that has been less one 1.0 per cent for long in the country.
As per the IDRA circular, signed by its chairman Dr. MosharrofHossain, the agents or development officers will get 10 per cent less commission of the accrued amount in the first year.
The 10 per cent commission will be adjusted after successful collection of renewal in the second year. The agents, however, will be given interest for the delayed payment.
People at the IDRA told the FE that they have collected data relating to such lapsed policies with the life firms that show that around 50 per cent lapsed after the first year premium collection.
They have identified that the existing low rate of commission on renewal collection is a reason behind the poor rate of renewals.