Archive · 25 Sep 2026
IRDAI Proposes Insurance Distribution Overhaul To Curb Mis-Selling
India's insurance regulator wants to change how insurance is sold.
It is concerned that some sellers receive large payments that customers cannot easily see.
The regulator also wants to reduce the chance that people are sold policies they do not need.
Under the proposal, insurers would have to explain commission rules more clearly.
Some bank employees could no longer receive rewards based on how many policies they sell.
Sellers might be linked to each policy so that misleading sales can be investigated.
Commissions for several types of insurance could be limited.
The proposal also seeks to reduce insurers' operating expenses and make insurance less costly for policyholders.
IRDAI has proposed a simpler three-tier insurance distribution system with tighter commission and expense rules.
The proposal would require disclosure of direct and indirect payouts, including promotional expenses, rewards and brand fees.
Volume-linked and reward-linked incentives for bank and Non-Banking Financial Company employees selling insurance could be prohibited.
Health insurance commissions could be capped at 15% to 20% for new policies and 5% to 10% for renewals and porting.
Distributor remuneration rose much faster than premiums between FY23 and FY25, including a 125% increase through sampled corporate agents.
- Who
- The Insurance Regulatory and Development Authority of India, insurers and insurance distributors are involved.
- What
- IRDAI has proposed an overhaul of insurance distribution, including commission caps, payout disclosures, lower expense limits and stronger mis-selling controls.
- When
- The proposal is part of IRDAI's current consultation paper; the cited remuneration comparisons cover FY23 to FY25.
- Where
- The proposals apply to India's insurance sector and were issued from New Delhi.
- Why
- IRDAI wants to address hidden payouts, rising distributor remuneration, high expenses, customer-choice concerns and insurance mis-selling.
- Consultation paper
- “Recalibrating Economics of Insurance Distribution”
- Distribution model
- A simpler three-tier architecture is proposed.
- Health commissions
- First-time commissions could be 15% to 20%; renewal and porting commissions could be 5% to 10%.
- Life insurer expense ceiling
- The proposed company-level ceiling could reach 15% within two years and 12.5% within five years.
- General insurer expense ceiling
- The ceiling could decline from 30% of Gross Written Premium to 20% of domestic Gross Direct Premium Income within five years.
- Corporate-agent remuneration
- It rose 125%, from Rs 9,580 crore to Rs 21,600 crore, while new business premium rose 28%, from Rs 63,000 crore to Rs 80,000 crore, between FY23 and FY25.
- Bancassurance payouts
- Average payouts in multiple tie-up bank arrangements reached 33%, with some cases as high as 72%.