IRDAI Issues Consultation Paper on Insurance Distribution Reforms
IRDAI seeks stakeholder views on changes aimed at strengthening and streamlining insurance distribution practices.
IRDAI has issued a consultation paper proposing reforms to insurance distribution in India.
IRDAI: The Insurance Regulatory and Development Authority of India (IRDAI) on Wednesday released a public consultation paper titled “Recalibrating Economics of Insurance Distribution,” proposing a major overhaul of how insurance is sold, priced and regulated in the country.
IRDAI: Three-tier distribution structure
The paper proposes scrapping today’s fragmented distributor categories in favour of three broad types: Insurance Distribution Entities (IDEs), Insurance Distribution Persons (IDPs), and Market Infrastructure Institutions (MIIs). The guiding principle — “same structure, same functions, same norms” — aims to ensure entities with similar roles face similar rules, cutting regulatory arbitrage. Entry norms, capital requirements and fees would be eased significantly to encourage participation, including from smaller markets.
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IRDAI: Expense and commission caps tightened
- Life insurers: Expense of Management (EoM) limit shifts to a company-wide basis linked to Gross Direct Premium Income (GDPI) — capped at 15% within two years, falling to 12.5% within five years.
- General insurers: Basis shifts from Gross Written Premium to domestic GDPI, with the cap cut from 30% to 20% over five years.
- Commissions would no longer be uniform — they’ll vary by segment, distribution channel and product complexity, with bonus incentives for sales in rural areas and small towns (population up to 50,000) and smaller cities (up to 10 lakh).
IRDAI: Crackdown on mis-selling
The proposals include mandatory disclosure of commission structures, a ban on volume-linked incentives for bank/NBFC staff selling insurance, commission claw-backs for mis-selling, public disclosure of offending distributors, and tracking of “dark patterns” in sales practices.
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IRDAI: Digital infrastructure
The paper backs expanded use of Bima Sugam and the Public Insurance Registry (PIR) as digital, customer-facing infrastructure to improve comparison, portability and access — especially for underserved populations.
IRDAI: Deadline
IRDAI has invited public comments via its web portal, a prescribed Excel template, or email, with submissions due by 25 October 2026. The full paper is available at iib.gov.in/dr.
