Business · Companies · 5 hrs ago
Indian NBFCs seek five-year transition to lower insurance commissions
India’s NBFC industry body has asked the insurance regulator, IRDAI, for five years to reduce insurance commissions.
IRDAI has proposed caps of 2% for credit life insurance and 5% for credit health insurance sold alongside loans.
NBFCs say their current commissions are 45% to 49%, while distribution costs are about 32% of the premium.
They propose gradually lowering commissions to 25% and want permission to pay insurers directly on borrowers’ behalf.
FIDC warns that the proposed caps could make distribution unviable and lead some NBFCs to leave the business, reducing access to insurance, especially in rural and semi-urban areas.
It says more than 1.4 million insurance salespeople who rely on small commissions could see earnings per transaction fall by about 90%.
IRDAI is accepting feedback until October 31, after extending the deadline.
NBFCs have asked India’s insurance regulator for five years to phase in lower commissions on credit-linked insurance.
The Finance Industry Development Council proposed reducing commissions from the current 45–49% to 25% over that period.
The industry body says proposed caps of 2% for credit life and 5% for credit health insurance would make distribution unviable.
It estimates distribution expenses at about 32% of premiums, including customer acquisition, technology, compliance and servicing costs.
FIDC warned that steep cuts could lead NBFCs to shrink or leave insurance distribution, affecting borrower counselling and insurance access.
- Who
- The Finance Industry Development Council, representing NBFCs, made the request to IRDAI.
- What
- It sought a five-year transition to reduce insurance commissions and permission for NBFCs to pay premiums directly to insurers on borrowers’ behalf.
- When
- FIDC made its submission on October 24. The article was published on October 25, 2026.
- Where
- The request was made to the Insurance Regulatory and Development Authority of India (IRDAI). The article is datelined Mumbai.
- Why
- FIDC says the proposed commission caps would not cover NBFCs’ distribution costs and could make the business unviable.
NBFC industry body FIDC
Insurance regulator IRDAI
Commission levels
NBFC industry body FIDC
FIDC wants commissions reduced gradually from 45–49% to 25% over five years.
Insurance regulator IRDAI
IRDAI has proposed caps of 2% for credit life and 5% for credit health insurance.
Impact on distribution
NBFC industry body FIDC
FIDC says the proposed caps could make distribution unviable and lead NBFCs to shrink or exit the business.
Insurance regulator IRDAI
Not stated in the source.
FIDC submitted its request to IRDAI for a five-year transition to lower commissions.
Economic Times published its report on the request.
- Proposed credit life commission cap
- 2%
- Proposed credit health commission cap
- 5%
- Estimated distribution expenses
- About 32% of the premium
- Current commissions
- 45–49%
- FIDC’s proposed commission level after five years
- 25%
2 sources
What people are saying
Just like the manufacturers have been provided with a 5-year glide path for expense of management alignment, NBFCs distributors should also be provided with a similar path on attenuation of commission structures over a 5-year period
This will lead to a viability conundrum for NBFCs, and they might be constrained to exercise their economic choice to downsize or exit their insurance distribution vertical, resulting in possible separations of salaried employees servicing the insurance distribution and servicing channel