Insurance intermediaries in India face potential revenue reductions of 60%-70% under proposed commission reforms that have drawn more than 650 responses from stakeholders, prompting the Insurance Regulatory and Development Authority of India (IRDAI) to extend its consultation deadline to October 31, 2026.
The regulator’s consultation paper, “Recalibrating Economics of Insurance Distribution,” was released on September 23, 2026. It proposes reinstating hard commission caps removed in 2023, when IRDAI replaced product-level limits with a single cap on insurers’ total management expenses.
“In view of the significant interest and to facilitate wider participation, the last date for submission of comments has been extended till 31st October 2026, providing additional time to stakeholders and members of the public to submit their feedback and suggestions,” the regulator said.
IRDAI says the 2023 change led to distribution costs growing faster than premiums. Between 2022-23 and 2024-25, life insurance payouts to corporate agents rose 125% while premiums grew 28%. In general insurance, broker commissions increased 173% against premium growth of 37%.
Surrenders and withdrawals reached 39% of life insurance benefits paid in FY26, up from 32% in FY22, and exceeded maturity payouts at 37%.
The proposed caps would set first-year life insurance commissions at 5%-20% for intermediaries and 6.25%-25% for agents, depending on premium payment term. Health insurance commissions would be capped at about 15% on new policies for intermediaries, with renewals limited to 5%.
Compulsory motor third-party cover would carry no distributor commission. Insurance sold alongside loans would be capped at 2%-5%, and making insurance a condition of credit would be banned.
Expense-of-management limits would also tighten. Life insurers would face a ceiling of 15% of gross direct premium income within two years and 12.5% within five. General insurers would see their limit fall from 30% of gross written premium to 20% of domestic gross direct premium income over five years.
Beyond caps, each policy would be linked to the seller’s identity, and commission could be clawed back when mis-selling is proven. Volume-linked bonuses and incentive trips for bank staff selling insurance would end, according to All India Radio.
Read more: IRDAI reverses course on insurance commissions after payouts surge
The Insurance Brokers Association of India (IBAI), which represents 798 licensed brokers placing about 40% of the country’s general insurance premium, filed its formal response on September 29, 2026. The association has warned that the proposals could put at least one million livelihoods at risk over five years, according to Business Standard.
S Mohan, vice president of IBAI, told ANI that intermediaries remain central to getting policies into the hands of consumers. “Insurance is sold, not bought over the counter,” Mohan said.
IBAI has called for the 2023 expense framework to remain in place until its scheduled 2028 review. It has also asked that any caps be limited to credit-linked and low-choice sales, with commercial and large risks exempted, and that the regulator publish an impact assessment before drafting new rules.
Seth has acknowledged that larger insurers, smaller companies, and new entrants each face distinct challenges, as do different categories of distributors. He has also said the reforms could create new business opportunities depending on how the transition is structured.
Read more: India moves to rein in insurance commissions just as foreign insurers are handed the keys
India is not the only market tightening distribution rules. Hong Kong’s Insurance Authority (IA) capped first-year commission on long-term participating policies at 70%, effective January 1, 2026. The Monetary Authority of Singapore (MAS) updated its Balanced Scorecard framework in December 2025, tying adviser pay partly to non-sales measures.
India’s insurance penetration stood at 3.7% in FY25, according to the IRDAI annual report. Swiss Re, the Zurich-based reinsurer, forecasts real premium growth of 6.9% annually from 2026 to 2030. The outcome of this consultation will shape whether brokers earning less than tied agents under the proposed rules can sustain their operations in a market growing at that pace.
Seth has described the commission review as phase one, with claims management, grievance redressal, and product regulation reforms expected in the next financial year.
