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The Insurance Regulatory and Development Authority of India (IRDAI) is considering introducing insurance commission caps from January 2027 as it pushes ahead with distribution reforms, despite broker concerns about potential revenue losses and job cuts.
The regulator is weighing January 1 and April 1, 2027, as possible implementation dates, Girija Subramanian, IRDAI's whole-time member for distribution, told Bloomberg.
The proposed reforms aim to curb distribution costs through product-wise commission caps and tighter limits on insurers' overall expenses. IRDAI has said commissions have risen faster than premiums since rules were relaxed in 2023, without a corresponding increase in insurance coverage.
Subramanian said commission caps should take effect sooner, arguing that phased reductions could encourage distributors to rush sales and increase the risk of mis-selling. Separately, the regulator has proposed a five-year transition to lower insurers' expense limits, with the first interim milestone in FY29.
The proposals have affected listed insurance distributors, including Policybazaar parent PB Fintech and Turtlemint. Their shares have fallen over 47% each since IRDAI proposed the caps on September 23.
Stakeholders have until October 25 to submit feedback. IRDAI will review the responses before publishing draft regulations for another round of consultation and finalizing the rules.
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The Insurance Brokers Association of India (IBAI) has warned that the proposed norms could cut broking sector revenues by 60-70% and lead to the loss of up to 10 lakh jobs across insurance distribution.
The association said the sector employs more than 83 lakh people. While supporting IRDAI's goal of making insurance more affordable and accessible, it argued that the proposals could threaten small businesses and micro, small and medium enterprises (MSMEs).
IBAI also disputed IRDAI's data showing that general insurance premiums sourced through brokers grew 37%, while commission payouts increased 173%. It said the rise largely reflected the reclassification of previously off-book marketing expenses following regularisation.
The association claimed general insurers' operating expenses averaged around 26.5% of gross premiums, below the mandated 30% limit. It also said policyholders received Rs 84.4 in non-life insurance claims for every Rs 100 of premiums paid over five years, compared with a global average of 72-75%.
IBAI has sought an extension of the feedback deadline to December-end and sent letters to the Prime Minister's Office and the finance ministry.
IRDAI has cited rising expenses at private insurers. Expenses at private life insurers increased to about 22% of total premiums from 16% in FY21, while those at private general insurers rose to roughly 32% from 25% in FY19. Additional rewards have pushed distributor remuneration 30-60% above base commissions in some cases.
Subramanian rejected concerns about large-scale job losses, saying the reforms could create employment by expanding distribution and lowering entry barriers.
IRDAI has also proposed additional commission allowances for business generated in smaller towns: 10% above the applicable limit for towns with populations below 10 lakh, rising to 20% for areas with fewer than 50,000 residents. Distributors could also be permitted to undertake financial and non-financial activities beyond insurance.
