Insurance regulator IRDAI likely to tighten commission norms
IRDAI is working on a draft proposal to limit commission payouts by insurers to distributors
The country’s insurance regulator, Insurance Regulatory and Development Authority of India (IRDAI), has proposed tighter transparency norms for insurance intermediaries, asking them to disclose commission earnings to the public and the regulator.
It is also considering a cap on commissions and bringing some order to the industry, according to insurance sources.
The move is aimed at improving disclosure standards and curbing rampant mis-selling while giving regulators, policyholders and other stakeholders a clearer picture of how intermediaries make their earnings in a segment where commission-driven competition is intense.
Insurance intermediaries include agents, brokers, corporate agents, banks, web aggregators and third-party administrators. In the life insurance segment, high commission adds to the cost of policies.
In the non-life segment, for an airline with a fleet worth $ 20 billion and annual premium of $ 30 million, insurance commission to brokers can range from 2.5-10%, according to sources. According to the IRDAI consultation paper issued two weeks ago, insurance intermediaries whose commission income exceeds a prescribed threshold will be required to make detailed annual disclosures to the regulator. These disclosures would include commission earnings, related-party transactions, profits generated from operations, and any dividend repatriation to promoters or parent entities.
The regulator believes that enhanced reporting will help monitor business practices and ensure that intermediary compensation structures remain transparent and aligned with policyholder interests.
The proposed framework also seeks to strengthen public accountability by mandating that such information be published on the websites of the intermediaries.
The latest proposal comes at a time when the regulator is planning to put a cap on commission earnings, a move that could disrupt the segment.
The total commission shelled out by 26 life and 28 non-life insurers crossed the Rs one lakh crore mark in FY25. The gross commission expenses of public sector general insurers, private general insurers, standalone health insurers and specialised insurers stood at Rs 9,335 crore, Rs 30,498 crore, Rs 7,365 crore and Rs 67 crore respectively for 2024-25, thus cumulatively amounting to a total gross commission expense of Rs 47,266 crore for the entire non-life insurance industry, according to the IRDAI Annual Report.
During 2024-25, life insurers paid a total amount of Rs 60,800 crore as commission.
The commission expenses ratio (commission expenses expressed as a percentage of premium) slightly increased to 6.86% in 2024-25 from 6.21% in 2023-24. While the IRDAI has not yet formally proposed a cap on commissions, it is reportedly working on a draft proposal to limit commission payouts by insurers to distributors, a move enabled by the January 2026 amendment to the Insurance Act that empowered the regulator to prescribe commission ceilings.
Insurance distribution is widely regarded as one of the most fiercely competitive segments of the financial services industry. Commission earnings in the insurance sector — particularly among intermediaries such as agents, brokers, web aggregators, corporate agents and insurance marketing firms — have long been a subject of intense competition, especially in high-growth segments such as health, motor, corporate and retail insurance.
With many insurers offering products that are broadly similar in terms of coverage and pricing, intermediaries often place significant emphasis on commission structures, incentive payouts and other commercial arrangements when deciding which products to distribute. “As a result, insurers compete aggressively to secure access to distribution channels, frequently offering higher commissions, performance-linked incentives and other benefits to attract and retain intermediaries,” said an official.
Intermediaries generally favour products that generate recurring renewal commissions, prompting strong competition to acquire new policyholders and policy contracts from big corporate clients. There is also considerable mis-selling and under-cutting by insurers to get business. The emergence of digital platforms, web aggregators and insurtech companies has further heightened competition by lowering customer acquisition costs, expanding market reach and increasing price transparency.
The country’s insurance regulator, Insurance Regulatory and Development Authority of India (IRDAI), has proposed tighter transparency norms for insurance intermediaries, asking them to disclose commission earnings to the public and the regulator.
It is also considering a cap on commissions and bringing some order to the industry, according to insurance sources.
The move is aimed at improving disclosure standards and curbing rampant mis-selling while giving regulators, policyholders and other stakeholders a clearer picture of how intermediaries make their earnings in a segment where commission-driven competition is intense.
Insurance intermediaries include agents, brokers, corporate agents, banks, web aggregators and third-party administrators. In the life insurance segment, high commission adds to the cost of policies.
In the non-life segment, for an airline with a fleet worth $ 20 billion and annual premium of $ 30 million, insurance commission to brokers can range from 2.5-10%, according to sources. According to the IRDAI consultation paper issued two weeks ago, insurance intermediaries whose commission income exceeds a prescribed threshold will be required to make detailed annual disclosures to the regulator. These disclosures would include commission earnings, related-party transactions, profits generated from operations, and any dividend repatriation to promoters or parent entities.
The regulator believes that enhanced reporting will help monitor business practices and ensure that intermediary compensation structures remain transparent and aligned with policyholder interests.
The proposed framework also seeks to strengthen public accountability by mandating that such information be published on the websites of the intermediaries.
The latest proposal comes at a time when the regulator is planning to put a cap on commission earnings, a move that could disrupt the segment.
The total commission shelled out by 26 life and 28 non-life insurers crossed the Rs one lakh crore mark in FY25. The gross commission expenses of public sector general insurers, private general insurers, standalone health insurers and specialised insurers stood at Rs 9,335 crore, Rs 30,498 crore, Rs 7,365 crore and Rs 67 crore respectively for 2024-25, thus cumulatively amounting to a total gross commission expense of Rs 47,266 crore for the entire non-life insurance industry, according to the IRDAI Annual Report.
During 2024-25, life insurers paid a total amount of Rs 60,800 crore as commission.
The commission expenses ratio (commission expenses expressed as a percentage of premium) slightly increased to 6.86% in 2024-25 from 6.21% in 2023-24. While the IRDAI has not yet formally proposed a cap on commissions, it is reportedly working on a draft proposal to limit commission payouts by insurers to distributors, a move enabled by the January 2026 amendment to the Insurance Act that empowered the regulator to prescribe commission ceilings.
Insurance distribution is widely regarded as one of the most fiercely competitive segments of the financial services industry. Commission earnings in the insurance sector — particularly among intermediaries such as agents, brokers, web aggregators, corporate agents and insurance marketing firms — have long been a subject of intense competition, especially in high-growth segments such as health, motor, corporate and retail insurance.
With many insurers offering products that are broadly similar in terms of coverage and pricing, intermediaries often place significant emphasis on commission structures, incentive payouts and other commercial arrangements when deciding which products to distribute. “As a result, insurers compete aggressively to secure access to distribution channels, frequently offering higher commissions, performance-linked incentives and other benefits to attract and retain intermediaries,” said an official.
Intermediaries generally favour products that generate recurring renewal commissions, prompting strong competition to acquire new policyholders and policy contracts from big corporate clients. There is also considerable mis-selling and under-cutting by insurers to get business. The emergence of digital platforms, web aggregators and insurtech companies has further heightened competition by lowering customer acquisition costs, expanding market reach and increasing price transparency.
