IRDAI’s EoM reset: LIC, SBI Life Insurance, New India Assurance within proposed caps; private insurers…

Fresh updates from the financial markets indicate that The Insurance Regulatory and Development Authority of India (IRDAI) has proposed a sweeping reset of insurance distribution economics, including softer Expense of Management (EoM) limits and product- and channel-specific commission caps.

The consultation paper, released by the regulator on September 23, proposes a five-year glide path under which life insurers would bring EoM down to 15 percent by FY29 and 12.5 percent by FY32, while general insurers would move to 25 percent and 20 percent, respectively.

An IIFL Capital analysis of listed insurers reveals that LIC, SBI Life Insurance and New India Assurance are the only three firms among those covered that are already below the proposed FY29 EoM ceiling. LIC noted gross commission of Rs 24,440 crore and total operating expenses of Rs 39,510 crore on gross premiums of Rs 5.37 lakh crore in FY26, resulting in an EoM ratio of 11.9 percent, against the proposed FY29 limit of 15 percent.

SBI Life noted gross commission of Rs 4,496 crore and total OPEX of Rs 6,226 crore on gross premiums of Rs 1.01 lakh crore, translating into an EoM ratio of 10.6 percent. New India Assurance, the only general insurer in the list already within the proposed limit, noted gross commission of Rs 4,427 crore and total OPEX of Rs 5,566 crore on gross direct premium income of Rs 46,024 crore, resulting in an EoM ratio of 21.7 percent, against the proposed FY29 ceiling of 25 percent.

The gap is considerably wider for several private insurers. Among life insurers, Tata AIA had an EoM ratio of 26.7 percent in FY26, followed by BLIC at 25.9 percent and Max Life at 25.1 percent, against a proposed FY29 ceiling of 15 percent. In general insurance, Go Digit had the highest ratio at 40.5 percent, followed by Acko at 38.7 percent and Aditya Birla Health at 37.9 percent, compared with the proposed 25 percent FY29 limit, per the report.

"EoM limits may be tough for insurers to achieve, especially GIs/SAHIs and smaller players." IIFL Capital stated in the report. It additionally noted that softer commissions and operating expenses could potentially improve insurer profitability or allow more attractive pricing, but could simultaneously reduce distributors' incentives to sell insurance.

What is IRDAI proposing on EoM?

IRDAI is proposing to shift general insurers from an EoM calculation based on Gross Written Premium (GWP) to one based on domestic Gross Direct Premium Income (GDPI). For life insurers, EoM would be calculated as total expenses as a percentage of total premium. The regulator is additionally proposing tighter treatment of reinsurance-related payments and greater cost-audit requirements.

The consultation paper additionally proposes hard commission caps across products and channels, restrictions on compulsory insurance bundling with loans, and greater disclosure of distributor remuneration. IRDAI has stated the broader objective is to reduce distribution costs and improve value for policyholders.

"IRDAI’s Consultation Paper represents a considered recalibration of the economics of insurance distribution. The proposed changes to expenses of management, commission structures, distribution architecture, and compulsory bundling are likely to have material implications for how insurers and intermediaries design and price their businesses, with differing consequences across the value chain," stated Ashish Teni, Senior Specialist – Insurance & Reinsurance, Trilegal

"The real significance will lie in how these principles translate into the final regulatory framework, particularly in addressing the IRDAI's concerns around distribution sustainability while preserving efficiency, market choice, and commercial viability. The consultation process is as a result critical to ensuring that regulatory intent is converted into a framework that is clear in law, workable in practice, and capable of sustaining a competitive and efficient insurance distribution ecosystem," stated Teni.

"Softer commissions and opex, prima facie, have the potential to spur expansion through softer pricing or improve profitability through softer costs for insurers," stated the report.

That stated, the proposals are still under consultation, with stakeholder feedback invited until October 25, 2026.