As IRDAI proposes commission caps, 7 in 10 buyers back curbs; 8 in 10 want upfront disclosure: Survey

New business data points to the fact that The Insurance Regulatory and Development Authority of India (IRDAI) on September 23, 2026, released a consultation paper on distribution reforms, proposing caps on commissions paid to agents and intermediaries, a phased reduction in insurers’ Expenses of Management (EoM) limits and measures to curb mis-selling.

The regulator has invited comments from stakeholders and the public by October 25. A LocalCircles survey of insurance buyers, which received over 94,000 responses, found that 71 percent backing limiting distributor commissions, while 82 percent want insurers to disclose the commission payable on a policy before purchase.

Under the proposed framework, commission limits would vary by insurance segment, line of business, distribution channel, product complexity and servicing effort. For individual life products, commissions for intermediaries are proposed at 5-20 percent and for agents at 6.25-25 percent, depending on the premium payment term.

For pure-term policies, first-year commission is proposed at 25 percent for intermediaries and 30 percent for agents, with renewal commissions of 7.5 percent and 10 percent, respectively. In individual health insurance, first-year commissions are proposed at 15 percent for distribution entities and 20 percent for agents, with renewal commissions of 5 percent and 10 percent.

For motor insurance, the proposal sets zero commission for third-party cover for distributors and 2.5 percent for agents and associates. Products sold in underserved areas could qualify for additional rewards.

IRDAI additionally proposes reducing life insurers’ EoM to 15 percent of gross direct premium income within two years and 12.5 percent within five years, with 10 percent as the long-term goal. For general insurers, the limit is proposed to decline from 30 percent to 20 percent over five years.

The paper proposes greater transparency around remuneration, including disclosure of commission structures by insurers and large distributors. It additionally seeks to bring direct and indirect, monetary and non-monetary remuneration within the definition of commission. Other measures include banning compulsory insurance bundling with loans, restricting volume-linked incentives for bank and NBFC staff, identifying the salesperson on policies, clawing back commissions in cases of mis-selling and auditing insurer and distributor expenses.

That stated, the proposal does not require individual buyers to be told the commission payable on their life, health or motor policy before purchase. That is the disclosure sought by 82 percent of respondents in the LocalCircles survey.

The proposed reforms follow IRDAI’s 2023 decision to remove most product-level commission caps and give insurers greater flexibility within overall EoM limits. In FY25, life insurers paid around Rs 60,800 crore in commissions, up 18 percent year-on-year, while premiums grew by less than 7 percent. Non-life insurers paid around Rs 47,266 crore.

The offering has advanced importance following the Sabka Bima, Sabki Raksha (Amendment of Insurance Laws) Act, 2025, which strengthened IRDAI’s powers over commissions and disclosures. In June 2026, the regulator additionally proposed annual disclosure requirements for larger intermediaries, including commission income and related-party transactions.

The survey highlights the consumer perspective: 86 percent stated they were never informed around the commission their agent or distributor would earn; 50 percent stated agents frequently recommended policies without clearly explaining suitability; and 71 percent stated limiting distributor commissions could help softer premiums.

The consultation as a result seeks to balance consumer protection, distribution viability and insurance accessibility. While tighter commission controls could address concerns around acquisition costs and mis-selling, insurers have argued that sharply softer payouts could make some low-premium segments, such as group and credit-life insurance, less commercially viable. IRDAI’s final framework will follow the public consultation, the survey stated.