Commission Up 259%, Premiums Up 34%: India’s Insurance Middlemen Problem
Insurance commission has risen 259% compared with a 34% increase in premiums, raising questions over the economics of India’s insurance distribution network.
Insurance commission has surged 259%, far outpacing the 34% rise in premiums in India.
New Delhi – Insurance Commission: Indian car buyers and health policyholders are bankrolling some of the sharpest commission growth in the insurance market, even though one product is legally mandatory and the other increasingly bought on individual initiative. The Insurance Regulatory and Development Authority of India has the proof in its own paper—and is now proposing caps. Whether those proposals survive industry pushback is another question.
The regulator’s new data reveals a pattern the industry won’t address voluntarily: where customers have no choice or little leverage, commissions soar. Between FY23 and FY25, brokers pocketed nearly eight times the growth in actual premiums. Motor and health together account for about 80% of general insurance premium placed through brokers, and they show the widest gap between what customers pay and what intermediaries take home.
Insurance Commission: Motor: The Mandatory Product Problem
Brokers’ motor premium grew 34% between FY23 and FY25. Their motor commission grew 259% over the same period. The average commission rate nearly tripled, from about 9% to about 25%.
On new vehicles, the numbers are indefensible. OEM brokers—the dealers’ own insurance units—generated ₹29,000 crore in premium and received about ₹7,050 crore in commission, averaging 27% on new vehicles. Dealer intermediaries, known as Motor Insurance Service Providers (MISPs), took 38%. Banks and NBFCs bundling insurance with vehicle loans still earn about 16% commission.
The regulator’s own framing cuts through the justifications: “no vehicle can leave the showroom without insurance.” The dealer is not persuading anyone to buy a policy. The law has already done that. Yet intermediaries are taking home rates that rival optional products where their work might actually move the needle.
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Insurance Commission: Health: The Real Scandal
Health insurance shows the same pattern, but worse. Broker health premium grew 53%, while commission grew 118%. The average retail health commission rate rose from about 10% to 30%.
The breakdown is uneven enough to raise questions about whose interests are being served. Peak commission on a group health policy reached 93%—a figure that suggests less about distribution difficulty and more about pricing power where large corporates should have none.
Policyholders are feeling it at renewal. The top six retail health insurers, which hold more than two-thirds of the market, raised prices on best-selling products by 6–15% a year. The regulator’s paper explicitly ties high distribution costs to these increases, alongside medical inflation.
But here’s what matters most: the claim settlement ratios show what policyholders actually receive. The industry average is 75%, meaning roughly one rupee in four claimed goes unpaid. One anonymised insurer paid out just 29% of the amount claimed. That’s not a distribution problem. That’s a payout problem, and high commissions aren’t making claims any more likely to be paid.
Insurance Commission: What IRDAI Is Proposing—And What It Means
The regulator has proposed:
- Third-party motor: nil commission for distribution entities, and 2.5% for agents on new vehicles.
- Own-damage cover on new vehicles: a cap of 5% for distribution entities and 10% for agents.
- Individual health: a cap of 15% on first-time sales and 5% on renewals or porting.
- Claim settlement ratios: insurers must publish them by amount paid, not by number of claims.
The last change could matter as much as the commission caps. A ratio based on claim count can look healthy—say, “we settled 90% of claims”—even when insurers paid only a fraction of what was claimed in total. Measuring by amount shows how much money actually reached policyholders, not just how many claims got touched.
The question now is whether the caps stick. The insurance industry will argue that lower commissions mean lower distribution reach, especially in underinsured segments. That’s the predictable move. Whether regulators hold firm when premium growth is on the line is where the real story will be.
