The Insurance Regulatory and Development Authority of India (Irdai) has proposed an overhaul of insurance distribution rules aimed at improving transparency, reducing mis-selling and making insurance products more accessible. A key proposal would require insurers and distributors to provide product details, premium rates, performance information, brochures and frequently asked questions without first asking customers for personal details such as phone numbers, email addresses or identification. Irdai has described requiring such information to access product information as a “dark pattern” and has proposed prohibiting it. The proposals are part of a consultation paper titled “Recalibrating Economics of Insurance Distribution”, which recommends changes to commissions, insurer expenses, mis-selling rules and distribution structures. Irdai Chairman Ajay Seth has said the objective is to expand insurance coverage, improve affordability and accessibility, and reduce the information gap between customers and insurers. The regulator wants consumers to compare policies based on price, performance, quality, claims and grievance redressal before making purchasing decisions. A major proposal concerns commissions. For life insurers, Irdai has suggested lower limits on first-year commissions and remuneration linked more closely to the product, distribution channel and effort involved in selling and servicing policies. It has also proposed reducing Expense of Management limits over five years to 12.5 per cent for life insurers and 20 per cent for general insurers. Irdai has highlighted rapid growth in commissions in some distribution channels. Between 2022-23 and 2024-25, premiums generated through brokers in general insurance rose 37 per cent, while commissions increased 173 per cent. In life insurance, premiums generated through corporate agents increased 28 per cent, compared with a 125 per cent rise in commissions. The proposed changes have raised concerns among investors about insurance distributors and companies that depend on commission income. Online platforms such as Policybazaar and Turtlemint could face pressure because of customer acquisition costs, while banks may also be affected depending on their distribution arrangements. Irdai has proposed restricting volume-linked and reward-linked incentives for employees of banks and non-banking financial companies involved in selling insurance. The regulator has proposed greater accountability for sales staff and clawbacks in cases of mis-selling. For consumers, the reforms could make it easier to compare insurance products and prices without surrendering contact details. Irdai expects greater distribution efficiency to potentially benefit policyholders through lower premiums, slower premium increases, improved returns on savings products or better claim ratios. However, lower commissions would not automatically translate into cheaper policies, as the outcome will depend on how insurers and distributors respond and whether savings are passed on. The proposals remain under consultation, with stakeholders invited to submit comments until October 25. Depending on the consultation process, the new framework could take effect from January 1, 2027, or April 1, 2027.
Irdai Proposes Lower Commissions, Greater Transparency in Insurance Distribution
