IRDAI is considering January 1 or April 1, 2027 to implement its proposed insurance distribution reforms, with commission caps likely to take effect ahead of phased reductions in insurers’ expense limits
The proposed caps threaten commission income for distributors such as PB Fintech and Turtlemint, while the IBAI has warned of a 60-70% revenue hit across the broking sector
Stakeholders have until October 25 to submit feedback, after which IRDAI will review the responses and issue draft regulations for another round of consultation before finalising the rules
The Insurance Regulatory and Development Authority of India (IRDAI) may introduce its proposed insurance commission caps as early as January 2027, amid opposition from brokers over potential revenue losses and job cuts.
The regulator is considering January 1 and April 1, 2027 as possible implementation dates for its distribution reforms, Girija Subramanian, whole-time member (distribution) at IRDAI, told Bloomberg in an interview.
The proposals seek to curb distribution costs through product-wise commission caps and tighter limits on insurers’ overall expenses. IRDAI has argued that commissions have risen faster than premiums since rules were relaxed in 2023, without a corresponding increase in insurance coverage.
Subramanian said commission caps should take effect sooner, arguing that phased reductions could encourage distributors to rush sales and increase the risk of mis-selling. Separately, IRDAI’s consultation paper proposes a five-year transition to lower expense limits for insurers, with the first interim milestone in FY29.
“There is an earlier-the-better case, but getting the reforms right is more important than getting them early,” she told Bloomberg.
The proposals have implications for listed insurance distributors such as Policybazaar parent PB Fintech and Turtlemint, whose businesses depend on commissions from insurance sales. Shares of PB Fintech and Turtlemint have slumped over 47% each since IRDAI proposed the commission caps on September 23.
However, the framework is still under consultation. Stakeholders have until October 25 to submit comments, after which IRDAI will review the feedback and publish draft regulations for another round of consultation before issuing the final rules.
The Insurance Brokers Association of India (IBAI) has warned that the proposed norms could cut broking sector revenues by 60–70% and result in the loss of up to 10 Lakh jobs across insurance distribution.
At a press briefing, the association’s representatives said the distribution sector employs more than 83 Lakh people. While supporting IRDAI’s objective of making insurance more affordable and accessible, they argued that the proposed changes threaten small businesses and MSMEs.
The resulting job losses could affect insurance awareness, policy renewals, assistance to policyholders, and insurance penetration among underserved communities, they added.
The association has sought an extension of the feedback deadline to December-end from October 25 and submitted letters to the Prime Minister’s Office and the finance ministry.
The IBAI also disputed IRDAI’s interpretation of data showing that general insurance premiums sourced through brokers grew 37%, while commission payouts rose 173%. It argued that the increase in commissions since FY23 largely reflected the reclassification of previously off-book marketing expenses following regularisation, rather than inflationary pressures on insurance consumers.
The association claimed that general insurers’ operating expenses averaged around 26.5% of gross premiums, below the mandated 30% limit. It also said policyholders received ₹84.4 in non-life insurance claim payouts for every ₹100 of premiums paid over five years, compared with a global average of 72–75%.
The representatives said the association was ready to work with IRDAI to address specific market anomalies, including mis-selling and disproportionate remuneration.
IRDAI, meanwhile, has pointed to rising expenses at private insurers. Expenses at private life insurers increased to about 22% of total premiums from 16% in FY21, while those at private general insurers rose to roughly 32% from 25% in FY19. Additional rewards have also pushed distributor remuneration 30–60% above base commissions in some cases.
Subramanian rejected concerns over large-scale job losses, arguing that the reforms would create employment by widening the distribution network and lowering entry barriers.
To encourage expansion beyond major cities, IRDAI has proposed allowing distributors to earn an additional 10% of the applicable commission limit on business generated in towns with populations below 10 Lakh. This would rise to 20% for areas with fewer than 50,000 residents.
Other proposals include allowing distributors to undertake financial and non-financial activities beyond insurance.
Source: Inc42
