Archive · 25 Sep 2026
IRDAI Proposes Insurance Commission Caps and Loan Bundling Curbs
India's insurance regulator, IRDAI, wants to change how insurance is sold.
It says commissions and other selling costs have grown faster than insurance premiums.
The regulator is worried that some customers are sold insurance they do not need.
It wants banks and lending companies to stop forcing borrowers to buy insurance with loans.
Special packages could still be allowed when they clearly help the customer, such as by lowering an interest rate.
IRDAI also wants customers to receive clearer information before buying a policy.
Insurance sellers could lose some commission if a policy was mis-sold.
The proposals would also limit certain sales rewards and motor insurance commissions.
Companies and industry participants can send comments on the proposals by October 25.
IRDAI has proposed caps on insurance commissions and tighter controls on distribution costs.
Banks and NBFCs would be barred from compulsorily bundling insurance with loans, except where customers receive a demonstrable benefit.
The proposals target mis-selling through suitability checks, distributor identification, standardised disclosures and possible commission clawbacks.
Motor insurance commissions would be capped, while dealers could not deny cashless repairs because customers bought coverage elsewhere.
The consultation paper proposes reducing insurers' expense-of-management limits, with comments invited by October 25.
- Who
- The Insurance Regulatory and Development Authority of India (IRDAI), insurers, agents, banks, NBFCs and other insurance distributors.
- What
- IRDAI proposed commission caps, anti-mis-selling safeguards, restrictions on compulsory insurance bundling with loans and lower expense-of-management limits.
- When
- The consultation papers were issued late Wednesday, with comments requested by October 25.
- Where
- The proposals were issued in Mumbai.
- Why
- IRDAI said distribution costs and commissions have risen faster than premiums and identified mis-selling as a contributor to premature life-policy surrender.
Regulatory and Customer Protection Case
Industry and Distributor Concerns
Commission and distribution limits
Regulatory and Customer Protection Case
IRDAI argues that controlling commissions and expense ratios can reduce excessive distribution costs and help address mis-selling.
Industry and Distributor Concerns
Banks, NBFCs, agents and other distributors could face an immediate reduction in revenue.
Insurance bundled with loans
Regulatory and Customer Protection Case
The regulator wants to prevent borrowers from being forced to buy life, property, motor or health insurance to obtain a loan.
Industry and Distributor Concerns
The proposals allow packages that provide a specific customer benefit, such as a lower interest rate when additional insurance security is provided.
Dealer-led motor insurance model
Regulatory and Customer Protection Case
Separating insurance sales from dealer relationships would give customers more choice, and dealers could not deny cashless repairs because coverage was bought elsewhere.
Industry and Distributor Concerns
The reforms could disrupt the traditional model linking vehicle sales, financing, insurance and after-sales servicing, according to Shailaja Lall.
- Public consultation deadline
- October 25
- Life-insurer expense limit
- Proposed reduction to 15% within two years and 12.5% within five years, linked to gross direct premium income.
- General-insurer expense limit
- Proposed reduction from 30% of gross written premium to 20% of domestic gross direct premium income over five years.
- Mandatory third-party motor insurance
- Proposed commission of zero for distribution entities and 2.5% for agents on new vehicles.
- Other motor insurance covers
- Proposed commission caps of 5% to 15%, depending on distribution channel and vehicle age.
- Mis-selling safeguards
- Proposals include customer-needs documentation, suitability checks, distributor identification and commission clawbacks.