11 hrs ago
IRDAI Proposes Overhaul to Cut Commissions and Mis-selling
India’s insurance regulator wants to change how insurance is sold.
It says distributors are often rewarded for making sales instead of helping customers choose suitable policies.
This can lead to mis-selling and policies being stopped early.
The regulator wants fewer and simpler types of distributors.
It also wants clearer prices, more choices and fewer compulsory insurance bundles.
Insurance sellers may be allowed to offer other financial products if the relevant regulators approve.
Life-insurance commissions would depend more on customers continuing their policies.
New digital systems could let people compare and buy insurance directly.
IRDAI says it will measure whether the changes improve complaints, costs, persistency and customer satisfaction.
IRDAI has proposed reforms to simplify insurance distribution and improve policyholder outcomes.
The consultation paper identifies high costs, complex distribution structures, weak transparency, bundling and mis-selling as key problems.
It proposes replacing eight distributor categories with three: Insurance Distribution Entity, Insurance Distribution Person and Market Infrastructure Institution.
The proposals would link life-insurance remuneration more closely to policy persistency and reduce incentives for single-premium and tax-benefit products.
IRDAI also recommends digital infrastructure, including Bima Sugam and the Public Insurance Registry, alongside outcome-based monitoring of complaints, costs and customer satisfaction.
- Who
- The Insurance Regulatory and Development Authority of India, insurers, distributors and policyholders.
- What
- IRDAI has issued a consultation paper proposing a major overhaul of insurance distribution, commissions and customer-protection measures.
- Where
- India’s insurance industry.
- When
- The proposals are contained in a recent consultation paper; the article also cites FY26 complaint data.
- Why
- IRDAI says current distribution incentives favor premium acquisition over suitability, persistency, service and long-term customer outcomes.
Key facts
- Proposed distributor types
- Insurance Distribution Entity, Insurance Distribution Person and Market Infrastructure Institution.
- Current distributor structure
- The existing system has eight categories with differing requirements and permitted activities.
- Life-insurance persistency
- 61st-month persistency is reported at 48% overall and 71% for the online channel.
- Motor commissions
- General-insurance motor commissions reportedly increased from about 9% to 25%.
- Retail-health commissions
- Retail-health commissions reportedly increased from 10% to 30%.
- Complaint outcomes
- In FY26, 63% of complaints disposed through Bima Bharosa were settled in favor of policyholders, while 75% of Ombudsman cases were settled in favor of customers.
- Digital infrastructure
- Bima Sugam is cited as a proposed neutral, digital, pull-based distribution platform, alongside the Public Insurance Registry.
Sources
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