The Insurance Regulatory and Development Authority of India (IRDAI) plans to introduce commission caps for insurance distributors starting January 2027, according to IRDAI executive Girija Subramanian in a Bloomberg interview. The proposed caps will cover most insurance categories, including life, health, motor, and property insurance, aiming to control rising distribution costs.
IRDAI had proposed reintroducing product-wide commission limits last month, alongside tighter expense restrictions that cap the share of premiums insurers can allocate to commissions and operating expenses. The regulator is allowing a five-year transition period for lowering expense limits but is fast-tracking commission caps to prevent distributors from rushing sales before reductions, which could increase mis-selling risks, Subramanian explained.
The move comes as insurance premiums have not increased proportionally with commissions since 2023, while higher distribution spending has not expanded insurance coverage. Expenses at private life insurers rose to about 22% of total premiums from 16% in fiscal 2021, and at private general insurers, expenses increased to roughly 32% from 25% in fiscal 2019, IRDAI data shows. The commission caps aim to address these inefficiencies and improve cost management in the sector.
IRDAI’s plan to implement commission caps by January 2027 follows its recent proposals and data indicating rising expense ratios among insurers. The regulator’s approach signals a shift toward tighter control over distribution expenses in the Indian insurance market.