India’s insurance regulator is proposing a commission structure that would pay an independent broker less than an insurer’s own tied agent – a reversal that cuts directly to what independent brokers are legally required to do.
The Insurance Brokers Association of India (IBAI) filed a formal response on September 29, 2026, to an IRDAI consultation paper released six days earlier. Titled “Recalibrating Economics of Insurance Distribution,” the paper proposes more than 30 commission caps across products and channels and a phased reduction in insurers’ expense of management (EoM) limits – to 20% for general insurers and 12.5% for life insurers within five years. Stakeholders have until October 25, 2026, to submit feedback.
IRDAI’s rationale is grounded in its own cost figures. According to the consultation paper, as reported by The Print, new business premium in life insurance grew 28% between FY2022-23 and FY2024-25, while total distributor remuneration rose 125% over the same period. In general insurance, broker premiums grew 37% while commissions climbed 173%, with average rates doubling from 8.5% to 17%.
The paper’s own characterisation: “Remuneration is growing four to five times faster than the business it is paid on.”
The paper also proposes consolidating the distribution architecture into three categories: Insurance Distribution Entities, Insurance Distribution Persons, and Market Infrastructure Institutions. Under this structure, multi-insurer channels – brokers, banks, and online platforms – would face lower commission caps than individual tied agents in almost every product line.
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Under Indian insurance regulation, brokers occupy a distinct legal position. They are the only distributors required by law to act in the customer's interest rather than the insurer’s.
IBAI represents 798 licensed brokers collectively placing approximately 40% of India's general insurance premium. As a directly affected party, its objections carry institutional weight and should be read in that context. The association argues the paper makes no meaningful distinction between insurance sold to a customer and insurance chosen by a customer through a self-appointed adviser.
“By IRDAI's own data, 69% of complaints against general insurers concern claims, and 63% of complaints on its own portal are decided in the customer’s favour. In a market where claims remain the policyholder’s principal concern, weakening the one participant whose duty runs to the customer cannot serve the customer’s interest,” an IBAI spokesperson said.
IBAI also challenges the data interpretation, arguing the apparent commission surge partly reflects a reclassification of payments previously recorded under other expense categories – something the consultation paper itself acknowledges. The association adds that the paper draws disproportionately from captive channels where consumers have limited choice, yet applies caps uniformly to independent brokers.
The knock-on effects reach beyond commission rates. As of March 31, 2025, brokers sponsored 14.81 lakh of India’s 27.18 lakh point-of-sale persons and 16,230 of 26,316 motor insurance service providers – the majority self-employed in Tier-2 and Tier-3 towns.
India’s non-life insurance penetration remained flat at 1% of GDP in FY2024-25, according to the IRDAI Annual Report 2024-25, against a global non-life average of 4.3% of GDP cited in the same report.
IBAI warns that an EoM reduction of more than 30% within five years cannot be absorbed through efficiency alone and will likely require headcount cuts across sales, servicing, and claims functions at both private and public sector insurers.
“Insurance is a people business. The paper will reduce the people who reach customers in small towns and the people who service them inside insurers, and it contains no mechanism to ensure that the savings reach policyholders as lower premiums,” the IBAI spokesperson said.
The proposals arrive at a notable moment. India formally permitted 100% foreign direct investment in insurance companies under the automatic route following passage of the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act 2025 in December 2025. The move was designed to attract foreign capital and expand market capacity.
IBAI argues that unwinding the 2023 EoM framework – before its own scheduled 2028 review and without a published regulatory impact assessment – risks undermining the stability foreign entrants require.
The approach also diverges from how other major Asian markets are handling the same question.
Hong Kong’s Insurance Authority (IA) has moved through conduct-based measures rather than blanket caps. According to the IA’s own published commentary, since 2025 it has introduced illustration rate caps, governance requirements on referral fees paid by broker companies effective October 2025, and a commission spreading mechanism for intermediaries effective January 2026 – restricting insurers from paying more than 70% of total commission in the first year of a regular-premium participating policy.
Malaysia’s Bank Negara Malaysia (BNM) took a similar approach. According to a legal alert published by Skrine Advocates & Solicitors, BNM issued a Policy Document on Prudent and Professional Conduct of Insurance and Takaful Brokers on August 29, 2025, with effect from January 1, 2026. The document ties commission limits to operating cost controls and governance requirements rather than introducing channel-specific caps.
IBAI notes that 18 of the 20 largest non-life markets globally impose no commission caps on commercial lines, and that India’s pre-2023 cap regime produced disguised payments and tax non-compliance that the 2023 reform resolved.
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IBAI plans to file a detailed submission before the October 25 deadline. It is calling for the 2023 EoM framework to be retained with tighter computation rules; any caps confined to credit-linked and coerced-choice sales; commercial and large risks to be exempted; premium refunds to customers in segments with persistently low claims ratios; and a regulatory impact assessment published before any regulation is drafted.
“This is not an argument against reform. It is an argument for reform that reaches the policyholder,” the spokesperson said.
IRDAI has not issued a public response to IBAI’s September 29 submission.
