Insurance Commission Caps: IRDAI Reviews 2 Lakh Responses, New Draft Rules Coming in December
IRDAI is moving closer to finalising its commission framework after examining extensive industry feedback, with revised draft regulations likely next month.
IRDAI has reviewed 2 lakh responses on insurance commission caps and is expected to release new draft rules in December.
NEW DELHI: Insurance Regulatory and Development Authority of India (IRDAI) has received more than two lakh comments and suggestions on its proposed overhaul of insurance distribution. About 15,000 stakeholders, including insurers, brokers and agents, sent in detailed feedback.
The regulator is now reviewing the responses and may change parts of the original proposals. It is expected to release a revised draft of the regulations by mid-December 2026, and the final rules are targeted to take effect from April 1, 2027.
What IRDAI Proposed and Why It Matters
The reforms come from a two-part consultation paper titled “Recalibrating Economics of Insurance Distribution,” released on September 23. The paper says payouts to distributors have been growing faster than premiums in several segments, and it seeks to bring those costs under control.
The central proposal is to bring back product-wise and channel-wise commission caps. These were scrapped in April 2023, when the regulator moved to an overall expenses of management (EoM) limit for each insurer. The new caps would be all-inclusive, so incentives, rewards, awards, brand-value payments and other non-cash benefits would count as commission and could not be used to get around the ceiling.
The paper also suggests lowering insurers’ EoM limits in stages over five years. Life insurers would have to reach 15% of gross premium within two years and 12.5% within five, while general insurers would move to 25% and then 20%.
The regulator also wants to simplify the distribution structure into three categories: Insurance Distribution Entities, Insurance Distribution Persons and Market Infrastructure Institutions. Other proposals include more disclosure of distributor earnings on large policies and a clawback mechanism if a policy is found to have been mis-sold. The announcement hit listed insurance and distribution stocks hard, and the parent company of Policybazaar saw one of the steepest falls.
IRDAI: Industry Pushback and the PoSP Debate
The proposals drew strong resistance from intermediaries. The Insurance Brokers Association of India warned that the changes could put more than 10 lakh livelihoods at risk and asked for the Prime Minister’s intervention. Brokers also questioned whether lower distribution costs would automatically mean better outcomes for policyholders. The original feedback deadline of October 25 was extended to October 31 after hundreds of early responses came in, and the final count has since crossed two lakh.
IRDAI Chairman Ajay Seth has also met brokers who run Point of Sales Person (PoSP) networks, and two demands came up. The first is permission to charge insurers for the cost of their technology platforms, which brokers say are essential to selling insurance and reaching new customers.IRDAI is not in favour of insurers paying a separate technology fee on top of commission. Its view is that customers, not insurers, should decide whether to pay for such platform services.
The second is commission parity with individual agents, as PoSPs argue that they do the same last-mile selling and deserve comparable pay. The stakes are high because large platforms such as PB Partners, Turtlemint and InsuranceDekho together have more than 10 lakh PoSP agents.
IRDAI: What Happens Next
The next step is an exposure draft, a revised but non-final version of the regulations that will be published for another round of public review before the rules are finalised. Industry watchers expect some of the original proposals to be softened, especially on commission levels, technology costs and the timeline for lower expense limits.
Chairman Seth has described the distribution paper as the first phase of a wider reform plan, with changes to claims management, grievance redressal and product regulation expected in the next financial year. For policyholders, the main hope is lower costs and fairer selling practices. For distributors and insurtech firms, the mid-December draft will show how much of their business model will have to change.
