The Insurance Regulatory and Development Authority on Thursday eased norms by allowing PSUs and private companies with a capital of Rs 0.1-3 crore to bargain for a special discount of 5 per cent in exchange of agency commission or brokers remuneration, when they cover their risks directly with a general insurer.

Companies with a capital base of over Rs 3 crore (Rs 30 million) would have the option of either availing the 5 per cent discount when they go for fire, petrochem, engineering and other tariff business directly with an insurer or seek the advise of brokers or agents.

In its circular to all general insurers, the IRDA also fixed the agency commission and brokers' remuneration rates, which vary between 5-17.5 per cent depending on the type of risks covered and the size of the company.

The new rates will be applicable from April 1 for a period of one year.

Individuals have to pay an agency commission of 10 per cent or a brokerage of 12.5 per cent for insuring for fire and other risks covered under the tariff regime.

For companies having paid-up capital upto Rs 3 crore, the agency commission would be 10 per cent and brokerage upto 12.5 per cent, while bigger companies with paid-up capital of Rs 3-25 crore (Rs 30-250 million) have to pay agency commission upto 6.25 per cent while the brokerage would be upto 7.5 per cent.

Companies with paid-up capital of above Rs 25 crore would now have to pay agency commission of upto 5 per cent or brokerage of upto 6.25 per cent.

For motor insurance, the agency commission and brokerage have been pegged at upto 10 per cent.

For other risks not covered under the tariff regime, the agency commission would be up to 15 per cent while the brokerage would be 17.5 per cent, IRDA said.

"The eligibility limits for special discount of (5 per cent) now stands raised from Rs 10 lakh (Rs 1 million) to Rs 3 crore paid-up capital without any distinction between public and private sector," it said.

For governmental departments where paid up capital could not be determined, IRDA said the facility of 5 per cent special discount in lieu of agency commission/ brokers' remuneration would continue.

The percentage of special discount in exchange of agency commission and brokerage would be on the final premium excluding service tax.

The decision by IRDA follows the recommendations by an expert committee to examine the remuneration system for the insurance brokers and agents in general insurance business.

IRDA made it clear that the insured when availing special discount in exchange of agency commission or brokerage, the same should be indicated on the policy.

"For the purpose of evidence of paid up capital, a copy of the latest balance sheet, which is in public domain, should be acceptable," the insurance watchdog said.

For sole proprietorship and partnership firms, it said a certificate from a chartered accountant to the client should be furnished.

For the Indian branches of a foreign company, it said the reference should be drawn from the paid up capital of the company in the country in which it was incorporated and there after it should be converted it into rupee.