The Insurance Regulatory and Development Authority of India (IRDAI) released a consultation paper on September 23 proposing commission caps on premiums paid by first-time and renewing insurance customers. The move targets digital insurance distributors like Policybazaar, Paytm, and PhonePe, who currently earn commissions as a percentage of gross premiums across health, term life, and motor insurance products, according to inc42.com.
Under the proposed rules, life insurers would have total management expenses capped at 12.5% of premiums within five years, down from the current 30%. General insurers would face a 20% cap, reduced from 30%. The IRDAI also highlighted concerns over distributors collecting personal details from prospective customers before revealing policy options, a practice common on platforms such as Policybazaar.
This regulatory intervention comes amid growing scrutiny of digital insurance distribution models that rely heavily on commissions from insurers. The caps could reshape the economics of platforms that facilitate policy sales by limiting their commission income. The move aligns with IRDAI’s broader efforts to protect consumers and ensure transparency in the insurance sector, which has seen rapid digitization in recent years.
The consultation paper’s release on September 23 marks the start of stakeholder feedback, after which the IRDAI will finalize the commission cap framework. The regulator’s next steps will be closely watched by digital insurance distributors and insurers, as the new rules could significantly impact their revenue models.