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IRDAI Proposes Sweeping Overhaul of Insurance Distribution Rules
India’s insurance regulator wants to change how insurance is sold.
It says the system should be simpler and clearer for customers.
Insurance companies would have to reduce the money spent on running and distributing policies over five years.
Commission rules would depend on the type of insurance and how difficult it is to sell.
Banks and lending companies would generally not be allowed to force borrowers to buy insurance with loans.
The regulator also wants customers to have more ways to buy motor insurance.
Large motor dealers would need to follow stronger distribution rules.
The proposals are still being considered and are not yet final rules.
IRDAI has proposed a customer-focused overhaul covering distribution structures, expenses, commissions, transparency and digital infrastructure.
Life insurers’ Expense of Management limits would fall to 15% within two years and 12.5% within five years.
General insurers’ limits would move to 25% within two years and 20% within five years, based on domestic GDPI.
The framework would create three distributor categories and prohibit compulsory insurance bundling with loans by banks and NBFCs.
Motor insurance reforms would target high commissions, multilayer distribution and limited customer choice in purchasing policies.
- Who
- The Insurance Regulatory and Development Authority of India (IRDAI) proposed the reforms, affecting insurers, distributors, banks, NBFCs and policyholders.
- What
- A consultation paper proposes changes to insurance distribution structures, Expense of Management limits, commissions, bundling, audits and motor insurance sales.
- Where
- The proposals apply to India’s insurance sector.
- When
- The consultation paper was released on September 23, 2026.
- Why
- IRDAI says the reforms would improve consumer outcomes, competition, transparency, operational efficiency and the affordability of insurance.
Regulatory and Consumer Benefits
Industry and Distribution Concerns
Lower expenses and commissions
Regulatory and Consumer Benefits
IRDAI says lower costs could reduce insurance prices, expand risk pools and improve policyholder returns.
Industry and Distribution Concerns
Insurers and distributors could face pressure to reduce revenue from commissions and absorb tighter operating-cost limits.
Standardized distribution rules
Regulatory and Consumer Benefits
IRDAI argues that three broad categories and activity-based rules would simplify regulation, improve competition and reduce regulatory arbitrage.
Industry and Distribution Concerns
Existing distributors and insurers may need to restructure operations and comply with new obligations across different business models.
Motor insurance sales
Regulatory and Consumer Benefits
IRDAI wants to reduce multilayer distribution, increase digital purchasing and give customers greater freedom to choose where they buy insurance.
Industry and Distribution Concerns
Motor dealers, brokers and other intermediaries could lose commission income, particularly on mandatory third-party insurance.
Key facts
- Life-insurer EoM targets
- 15% within two years and 12.5% within five years.
- General-insurer EoM targets
- 25% within two years and 20% within five years, based on domestic Gross Direct Premium Income.
- Proposed distributor categories
- Insurance Distribution Entities, Insurance Distribution Persons and Market Infrastructure Institutions.
- Commission approach
- Limits would vary by business line, distribution channel, product complexity and servicing effort.
- Compulsory bundling
- Banks and NBFCs acting as distribution entities would be barred from compulsorily bundling insurance with loans and other services.
- Motor commissions
- Average motor insurance commission was reported at 24%, ranging from 13% to 50%.
- Motor distribution proposal
- Dealers would have to offer customers options including platforms such as Bima Sugam, and could not deny cashless repairs based on purchase channel.
Quotes
Insurance Regulatory and Development Authority of India
India’s insurance regulator, which issued the public consultation paper
“customer-centric, competitive, efficient and transparent distribution ecosystem, while enabling better and sustainable outcomes for policyholders, insurers and distributors”
thehindubusinessline.com
Sources
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