Go Digit says IRDAI's EoM rules led to unintended rise in commission

Mumbai: Go Digit General Insurance has flagged unintended consequences of the existing expense management framework for pushing up insurance commissions instead of curbing distribution costs, as the regulator considers a revised set of rules to address shortcomings in the current regime, Chairman and Founder Kamesh Goyal said.

Goyal said that the existing Expense of Management (EoM) framework had failed to achieve its intended objective of reducing expenses, with some insurers using savings from large government and crop insurance businesses to increase commissions in retail segments.

"The regulator's intent, which was correct, to reduce the expenses, in fact, the reverse has happened," Goyal said.


The Insurance Regulatory and Development Authority of India's (Irdai) discussion paper proposes a revised framework linking commissions to the nature of insurance products and distribution costs, alongside reduction in the overall expense limits.

Goyal said the proposals suggest measures to bring commissions within the broader expense management architecture. The paper also proposes giving crop insurance a different weightage, recognising the distinct economics of the business.

However, he did not draw conclusions on the financial impact until the regulator finalised the framework.

"We would not like to speculate as to what the final guidelines will be," he said, adding that investors could use the company's disclosures on commission and operating expenses to assess the potential impact.

Go Digit has prioritised underwriting profitability over premium growth and avoided writing loss-making business merely to absorb operating expenses. The insurer reported a decline in second-quarter profit of 31% to Rs 142 crore amid elevated claims, particularly from floods in Gujarat.

Goyal said the company would continue to prioritise underwriting discipline over growth in a market where commissions remain elevated and third-party motor insurance prices have not been revised.

Shares of the company today rose 1.05% to Rs 260 on BSE when the benchmark index rose 2.60%.