Insurance regulator IRDAI has proposed an overhaul of norms governing insurance distribution, commissions and expenses, a development that turned the spotlight on shares of insurers and intermediaries on Thursday, particularly PB Fintech and Turtlemint Fintech.
Opening consultation paper ‘Recalibrating economics of insurance distribution’ for public comments, the Insurance Regulatory and Development Authority of India (IRDAI) on Wednesday said it is outlining a comprehensive framework of reforms around insurance distribution, structure, market conduct, transparency and leveraging digital infrastructure, besides the expenses and commissions.
On the commission framework, IRDAI said instead of a uniform approach, commission limits would take into account the segment, line of business, distribution channel, product complexity and the effort involved in selling and servicing the product. A system of rewards, over and above normal commission limits, for sale of products in under-served areas is proposed.
Cost audits and safeguards against indirect payments are also proposed to ensure greater accountability for actual cost of distribution. Insurers and large distribution entities would be required to disclose commission policies and structures in a simple and accessible manner, while specified commercial policies would carry commission disclosures. This would enable customers to be aware of the distribution costs built into the pricing.
The proposed reforms seek to strengthen safeguards against compulsory bundling of insurance with other financial products and curb mis-selling through greater accountability. Measures include linking the identity of the individual distributor to every policy sold, public disclosure of mis-selling incidents and commission claw-backs in proven cases of mis-selling.
Tracking dark patterns and making relevant performance information publicly available to strengthen market discipline figures in the proposal.
The Expense of Management (EoM) framework is proposed to be recalibrated through lower limits with a phased glide path. The reduction in EoM is intended to lower the overall cost of insurance and expand the risk pool available in general insurance and enhancing returns to policyholders in life savings products.
IRDAI said the proposed distribution architecture is guided by the principle of “same structure, same functions, same norms.” It seeks to replace the existing complex and fragmented architecture with three broad categories of distribution entities namely Insurance Distribution Entities, Insurance Distribution Persons and Market Infrastructure Institutions.
Simpler registration, lower entry and capital requirements, reduced regulatory fees and greater flexibility for distributors to undertake insurance as well as other financial and non-financial activities are envisaged in the consultation paper.
On the proposed distribution reforms, Generali Central Life Insurance MD and CEO Alok Rungta said “we are currently evaluating the proposals to understand their implications and would be seeking further clarity as the consultation progresses.”
Emkay Research said the proposals could radically cut commissions across products and potentially redefine the insurance business model, including completely destroying some business models. The reduction in commission would make insurance distribution an unviable business. It, however, expected the final regulations to be less stringent.
Published – September 24, 2026 10:46 pm IST
