India Regulator to Introduce Commission Caps by January 2027
India's insurance regulator, IRDAI, plans to implement distribution reforms, including commission caps for insurers, as early as January 2027, despite industry pushback.
The Insurance Regulatory and Development Authority of India (IRDAI) is moving forward with plans to cap commissions paid by insurers to distributors, potentially by January 2027, according to IRDAI executive Girija Subramanian. The proposed reforms, which faced backlash from insurance brokers, aim to address rising distribution costs that have not translated into broader insurance coverage.
Last month, IRDAI proposed reintroducing product-wide commission caps across most insurance categories, including life, health, motor, and property. The regulator also seeks to implement tighter expense limits on insurers' premium spending. While expense limits have a five-year transition period, commission caps are being fast-tracked to prevent potential mis-selling risks associated with front-loading sales before reductions.
The Insurance Brokers Association of India (IBAI) has voiced strong opposition, estimating the changes could reduce the broking sector's revenue by 60-70%. IBAI disputes IRDAI's data, attributing commission increases to reclassification of marketing expenses rather than a fundamental shift in payouts. They argue the current market offers good value to policyholders.
PB Fintech, the parent company of insurance marketplace Policybazaar, estimates the commission caps could impact its revenue by up to 30%, particularly in its general insurance business. CEO Yashish Dahiya stated that if the economics of distribution are significantly altered, the company might explore obtaining an insurance manufacturing license.