The Insurance Regulatory and Development Authority of India (IRDAI) has proposed new rules requiring insurance intermediaries earning over ₹10 crore annually in commissions to publicly disclose these earnings on their websites. The regulator also suggested tagging every insurance policy with the individual responsible for the sale to enhance consumer protection. These proposals were outlined in a recent consultation paper aimed at addressing high commission costs in the insurance sector, according to inc42.com.
Currently, commissions can account for 40% to 60% of motor insurance premiums paid by customers, inflating the true cost of coverage. For example, on a ₹50,000 motor insurance premium, insurers may pay ₹20,000 to ₹30,000 to dealers or intermediaries. IRDAI has previously set commission caps between 15% and 35% depending on the product, but commission expenses continue to rise. Life insurers paid ₹60,800 crore in commissions in FY25, an 18% year-on-year increase, while non-life insurance commissions reached ₹47,266 crore. IRDAI has also taken action against 23 insurers for exceeding expense limits, per inc42.com.
The proposed reforms aim to rein in excessive distribution costs that inflate premiums for consumers and impact the profitability of insurance startups. By increasing transparency around commissions and linking policies to sales agents, IRDAI seeks to strengthen consumer trust and reduce hidden costs. The move comes amid modest overall premium growth of 6.7% in FY25, highlighting the disproportionate rise in commission payouts. These regulatory changes could reshape the insurance distribution landscape in India, affecting startups reliant on high commission structures, according to inc42.com.
IRDAI’s consultation paper marks a significant step in regulatory oversight of insurance commissions, with public disclosures expected to increase accountability. The regulator’s ongoing efforts to cap commissions and monitor expenses continue to influence the sector’s cost dynamics. The next phase involves stakeholder feedback on the proposals before any formal rule changes are implemented, inc42.com reported.