LIC sees advantage in IRDAI’s proposed distribution reforms, says commission caps could put it in a favourable position
LIC believes the proposed commission restrictions may work in its favour, potentially giving India’s largest life insurer an advantage as insurance distribution economics change.
LIC sees an opportunity in IRDAI's proposed distribution reforms, believing commission caps could strengthen its competitive position in the insurance market. AI Generated Image.
NEW DELHI: Life Insurance Corporation of India (LIC) believes the insurance regulator’s proposed distribution reforms could put it in a favourable competitive position, arguing that private insurers may have to undertake considerable work to bring their overall expense ratios within the proposed limits.
Speaking during LIC’s Q2 FY27 earnings call on Thursday, CEO and Managing Director R Doraiswamy said the corporation was comfortable with the broad expense caps proposed by the Insurance Regulatory and Development Authority of India (IRDAI), even as it had sought changes to certain provisions affecting specific products and premium-paying terms.
Responding to a question on whether the proposed restrictions on distribution costs could give LIC a competitive advantage over private insurers, Doraiswamy said reducing commissions alone would not be enough for insurers to meet the proposed overall expense limits.
“The product pricing does not depend on the total expenses built into the product. And towards that, LIC continues to be very comfortable in terms of the caps that are being proposed,” he said.
He added that private insurers would still have to work towards bringing their overall expense ratios, including administrative costs, within the proposed limits.
“So we stand to be on a distinctly advantageous position, and we will be closely watching the market as it unfolds,” Doraiswamy said.
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LIC seeks global benchmarks, better glide path
Despite seeing a potential competitive advantage in the proposed framework, LIC has asked IRDAI to align the distribution-cost limits with international industry practices and provide a more accommodating implementation timeline.
Doraiswamy said the corporation’s recommendations were based on global benchmarks and took into account the operating realities of the insurance industry.
“Our suggestions are broadly based on what is the industry standard outside the country. We are requesting that it be in alignment with the international numbers,” he said.
LIC has also highlighted the impact of the proposed limits on certain product categories and premium-paying terms.
“There are some product lines and some premium paying terms in which we are comfortably within the proposed caps. There are some premium paying terms and some product lines where we are getting impacted, which we have brought in our suggestions,” he said.
The corporation has submitted its feedback to the regulator after consulting its intermediaries and agent associations.
LIC wants to protect agent commissions
The proposed changes are significant for LIC given its extensive dependence on its individual agency network.
Doraiswamy said the corporation had incorporated feedback from agent associations and other intermediaries while preparing its recommendations and would continue engaging with the regulator to protect their interests.
“We would like to protect the interests of our agents in as much as whatever is possible within the regulatory framework,” he said.
Responding to concerns about the cumulative impact of regulatory changes on agent earnings, including revised surrender-value requirements and the proposed distribution reforms, he said LIC had already realigned commissions following the introduction of the revised surrender-value framework in September 2024.
However, he clarified that the GST changes had not affected agent commissions, as LIC had not passed on the impact to its intermediaries.
“This year we are trying our best. We are giving our feedback. We are continuing to engage with the regulator to see how best we can protect the commission rates or whatever it is that we are currently providing to our agents,” he said.
LIC looks to improve agent productivity
The corporation is also focusing on improving agent productivity and expanding earning opportunities to ensure that the proposed changes do not undermine the sustainability of its agency network.
Doraiswamy said LIC would invest in training, provide agents with better tools and explore opportunities for them to distribute non-competing products outside its own portfolio.
The insurer would also work towards improving agents’ ability to identify customer requirements and sell products suited to different segments.
LIC had 14.52 lakh agents as of September 30, 2026. Its agency channel accounted for 98.4% of policies sold during the first half of FY27 and contributed 91.81% of individual new business premium on a premium basis.
LIC broadly backs reforms
While seeking modifications to specific provisions, LIC expressed broad support for IRDAI’s proposed regulatory overhaul, saying the changes could benefit policyholders and accelerate the growth of the life insurance industry.
In his opening remarks, Doraiswamy said the corporation was optimistic about the proposed changes.
“We believe that most of these changes are in the best interest of the customers and will lead to further accelerated growth of the life insurance industry in India,” he said.
IRDAI’s September 2026 consultation paper seeks to recalibrate the economics of insurance distribution through changes to commission structures and expense limits. The final framework is expected to have implications for insurers’ distribution strategies, agent remuneration and the competitive dynamics of the life insurance industry.
