IRDAI Questions High Bank Insurance Payouts and Sales Incentives

India’s insurance regulator is examining how banks and other distributors are paid for selling insurance.

It found that banks can receive much higher payouts when they have several insurer partnerships.

IRDAI is asking whether these payments are based on the work done or on banks’ access to customers.

The regulator says customers often cannot see how much of their premium goes toward commissions.

This may encourage sellers to recommend policies that pay more, even if they are not the best fit.

IRDAI says this can lead to unsuitable sales, policy lapses and policy surrenders.

It has proposed clearer commission limits and fewer layers of distributors.

It also wants customers to compare and buy policies more directly, including through digital systems such as Bima Sugam.

The goal is to make insurance something people actively choose rather than something mainly sold to them.