IRDAI Cracks Down on High Insurance Commissions

The Insurance Regulatory and Development Authority of India (IRDAI) is taking steps to address the issue of high and opaque commission payouts in the insurance industry.

In FY25, insurance companies paid significantly higher commissions compared to the growth in premiums.

IRDAI has asked 23 insurers to explain why they exceeded regulatory caps on expenses.

High commissions, especially in the first year, can lead to agents focusing on new customers rather than retaining existing ones.

This can result in mis-selling of insurance products, particularly to vulnerable groups.

IRDAI is considering setting limits on commissions, discouraging front-loading, and mandating clear disclosures to improve transparency and prevent mis-selling.