Brokers’ Plea Against IRDAI Reforms: Govt Asks Them To Talk To Regulator, Says Report
IRDAI Reforms have prompted brokers to seek government intervention, but the Centre has advised them to engage with the regulator to resolve their concerns, according to a news report.
IRDAI Reforms face opposition from insurance brokers, with the government asking them to discuss their concerns directly with the regulator. AI Generated Image.
NEW DELHI, IRDAI Reforms: Insurance brokers who went to the central government to oppose the insurance regulator’s proposed distribution reforms have been advised to take their objections directly to IRDAI chairman Ajay Seth, Moneycontrol reported on November 12 citing sources. A delegation of brokers met Finance Minister Nirmala Sitharaman, along with officials from the Prime Minister’s Office and the Department of Financial Services, on November 10.
They asked the government to step in before the regulator finalises its plan to change how intermediaries are paid.
IRDAI Reforms: What IRDAI Is Proposing and Why Brokers Are Alarmed
The dispute centres on a consultation paper titled “Recalibrating Economics of Insurance Distribution,” which IRDAI released on September 23, 2026. It proposes bringing back hard commission caps that are specific to each product and distribution channel. It also proposes cutting the overall expenses of management (EoM) limits that insurers must operate within, to be done in phases rather than all at once. The EoM limit covers commissions as well as operating costs such as staff, offices and technology.
The caps would reverse a major policy shift made in 2023. Until then, insurers worked under product-wise commission ceilings. From April 2023, the regulator replaced them with a single overall expense limit and let insurers decide what to pay distributors under board-approved policies. IRDAI now says that approach has not delivered what it intended. It points to distributor remuneration growing several times faster than premiums, and to instances of excessive commissions and mis-selling. The regulator wants to make distribution costs more rational and transparent, and to shift incentives towards renewals and policy persistency rather than upfront sales volumes.
Also Read: India’s Life Insurers Cross ₹42,900 Crore in a Single Month as Growth Hits 26%
Brokers argue that the proposed ceilings ignore the real cost of their work. They say the caps do not adequately account for advisory services, risk assessment, policy servicing and claims support. They also point out that, under the draft structure, multi-insurer channels such as brokers, banks and online platforms would in most product lines be allowed to earn less than tied agents who sell for a single company. Industry estimates suggest some brokers could see their revenues fall sharply if the caps go through unchanged. The proposal also hit the stock market, with listed insurance and distribution-linked shares falling heavily after the paper was published.
IRDAI Reforms: Job Cuts and Business Uncertainty Weigh on the Broking Sector
The uncertainty is already shaping decisions inside broking firms. A broker who approached the DFS, and asked not to be named, said companies are modelling what their businesses would look like under the proposed commission structure. Hiring plans are being reconsidered, and some players are preparing for possible job cuts. Staff taken on during the sector’s recent expansion are worried about their positions, and another industry source said employees are beginning to look for opportunities elsewhere.
The Insurance Brokers Association of India has opposed the hard caps and asked that the 2023 EoM framework stay in place until its scheduled review in 2028. It has also sought an independent assessment of how the proposed changes would affect the market. The association argues that the data in the consultation paper itself shows the existing framework is working to some extent.
It notes that general insurers’ total management expenses fell from 28.2% of premium in FY2022-23 to 26.5% in FY2024-25, while premiums grew by roughly 13% a year. It also says part of the apparent surge in commissions reflects payments being reclassified from other expense heads, and that the paper leans on data from captive channels where customers have little choice, yet applies the caps uniformly to independent brokers. The association has warned that livelihoods, competition and insurance penetration could suffer, especially in smaller towns, if distributors are forced to cut their costs sharply.
IRDAI Reforms: IRDAI Signals Openness as the Final Framework Awaits
The regulator has said it will consider stakeholder feedback before finalising the framework. Seth has said previously that IRDAI does not intend to disrupt the livelihoods of insurance agents or existing business models, and he has indicated that a phased rollout of the commission changes could be considered. The consultation drew more than 650 submissions from brokers, insurers, agents, banks and policyholders, and the deadline was extended to the end of October to accommodate the response.
The final shape of the rules and the timeline for implementing them will now depend on how IRDAI weighs these submissions against its concerns about rising distribution costs. For brokers, the government’s advice to deal with the regulator directly suggests the real negotiation will happen at IRDAI rather than in the finance ministry. For policyholders, the outcome could affect both the price of cover and the quality of advice and claims support they receive.
