Today is the last day for insurers, agents, brokers and ordinary policyholders to tell India’s insurance regulator what they think of its biggest distribution shake-up in years. The Insurance Regulatory and Development Authority of India (IRDAI) closes feedback on its proposed commission caps and expense limits on October 31, after extending the deadline from October 25 following an unusually strong response.
The regulator says it has already received more than 650 comments on its two-part consultation paper, “Recalibrating Economics of Insurance Distribution”, released on September 23. The volume of responses, and the sharp disagreement within them, shows how much is at stake: this reform could redraw how insurance is sold in India, and who earns what from every policy.
What IRDAI has proposed
At the heart of the paper is a return to product-level commission caps, which IRDAI removed in 2023 when it replaced them with a single ceiling on insurers’ total management expenses. The new proposal sets different limits for different products and channels.
For regular life insurance policies with a premium payment term of 10 years or more, individual agents could earn up to 25 percent in the first year and 5 percent on renewals, while corporate agents and brokers would be capped at 20 percent and 3 percent. On multi-year pure term plans, agents could earn up to 30 percent in the first year and 10 percent on renewals.
Health insurance would see first-year commissions capped at 20 percent for agents and 15 percent for distribution entities, falling to 10 percent and 5 percent respectively on renewals. Compulsory motor third-party cover would carry no distributor commission at all. Insurance sold alongside loans would be capped at 2 to 5 percent, and making insurance a condition of getting credit would be banned outright.
The paper also widens what counts as commission. Incentives, awards, brand payments and non-cash benefits such as gifts and trips would all fall under the caps, closing routes that distributors have used to top up earnings beyond stated commissions.
Lower expenses for insurers too
The proposals do not stop at distributor payouts. IRDAI wants life insurers to bring their expense of management down to 15 percent of gross direct premium income within two years, and to 12.5 percent within five years. General insurers would face a 20 percent limit on domestic premium within five years.
The stated aim: cut distribution costs and leave policyholders with better value. IRDAI chairman Ajay Seth has said the average commission in health insurance today is around 24 percent across new and renewal business, and the proposals seek to bring that down to roughly 15 to 20 percent.
Why agents and brokers are pushing back
Intermediaries argue the cuts go too far, too fast. Insurance brokers have warned that the proposed caps could slash their revenues by 60 to 70 percent and lead to job losses across distribution businesses. The Insurance Brokers Association of India had sought an extension of the feedback deadline till the end of December.
Non-banking finance companies have made a separate case. The Finance Industry Development Council, the industry body for NBFCs, told IRDAI in an October 24 submission that the proposed ceilings of 2 percent on credit life and 5 percent on credit health insurance do not reflect what it costs lenders to distribute these policies. It noted that commissions on credit-linked insurance currently run at 45 to 49 percent, and proposed a voluntary glide path: bringing that down to about 25 percent over five years.
Distributors in smaller towns get some relief: those selling in towns with a population of up to 50,000 could earn up to 20 percent more than the normal first-year limit, and insurers would have to aim to pay commission within seven days of receiving the premium.
Will policies actually get cheaper?
That is the question every policyholder will ask, and experts urge caution. Lower payouts to agents, brokers and banks will not automatically mean cheaper policies, because the eventual impact depends on how insurers adjust premiums, operating costs and distribution strategies.
What is clearer is the direction of travel. IRDAI has signalled that commission reform is only phase one, with claims management, grievance redressal and product regulation reforms expected next financial year. Seth has indicated January 1 and April 1 as possible implementation dates, depending on the feedback received.
For now, nothing is final: these are draft proposals under consultation, not rules. Whatever IRDAI decides after today will shape agent incomes, insurer costs and possibly policy prices for years.
FAQs
What is the last date to send feedback on IRDAI’s insurance commission proposals?
October 31, 2026. IRDAI extended the deadline from October 25 after receiving more than 650 comments.
What does IRDAI’s consultation paper propose?
Product-specific commission caps for life, health, motor and credit-linked insurance, a wider definition of commission covering incentives and gifts, and phased cuts to insurers’ expense limits.
Are these rules final yet?
No. They are draft proposals under consultation. IRDAI has said it is still engaging with stakeholder groups and has not reached a conclusion.
Will insurance policies become cheaper if commissions are capped?
Not necessarily. Experts say lower commissions do not automatically mean lower premiums, since insurers may adjust other costs and pricing strategies.
When could the new rules take effect?
IRDAI chairman Ajay Seth has indicated January 1 and April 1 as possible implementation dates, depending on the feedback received.
