IRDAI has proposed a new commission structure under which payouts would be determined based on the distribution channel, product category, customer life cycle, and an all-cost-inclusive commission framework
Insurance brokers have opposed the provisions to cap commissions in the recent proposals issued by the Insurance Regulatory and Development Authority of India (IRDAI) to reform the industry’s distribution economics, arguing that the move would lead to lower revenues and significant job losses across the sector.
Seeking an extension of the feedback submission deadline to the end of December from the current October 25 deadline, brokers said the proposed framework does not exist anywhere else in the world and that such an “untested” overhaul requires wider consultation and more deliberation.
Commission reduction
At the heart of the opposition is the proposed reduction in commissions. The Insurance Brokers Association of India (IBAI) said the move could sharply reduce industry revenues and potentially threaten the livelihoods of nearly one million (10 lakh) people employed in the insurance distribution ecosystem.
“Our concern is that the paper’s central approach, involving more than 30 commission caps across products and distribution channels, coupled with a one-third reduction in insurers’ overall expense limits, will harm the very policyholders it seeks to protect. The cost savings would effectively be transferred from distributors’ and insurers’ employees to insurance company owners, with no mechanism to ensure that the benefits are passed on to policyholders,” IBAI said in a letter addressed to the Prime Minister’s Office.
The association also questioned whether the proposed measures would enhance policyholder choice and freedom. It expressed doubts that the reduction in costs resulting from the new framework would ultimately be passed on to customers.
IRDAI has proposed a new commission structure under which payouts would be determined based on the distribution channel, product category, customer life cycle, and an all-cost-inclusive commission framework.
In its representation, IBAI also suggested that the methodology for calculating the Expense of Management (EoM) should remain unchanged from the 2023 framework, although the computation rules could be tightened. IRDAI, however, has proposed revising the EoM framework with the objective of gradually reducing insurers’ overall expenses. This marks a departure from the 2023 regulations.
EoM representation
EoM represents the portion of an insurance policy’s price that is allocated towards an insurer’s administrative and operating costs. Lower EoM levels are generally considered beneficial for policyholders, as they can improve pricing efficiency.
Brokers further proposed that if an insurer’s claims ratio falls below a prescribed threshold, say 65 per cent, or if a policy is found to have been mis-sold, insurers should be required to either refund part of the premium or reduce renewal premiums. The association pointed out that similar mechanisms already exist under schemes such as PMFBY and Ayushman Bharat.
The insurance regulator released the consultation paper in September 2026, proposing a comprehensive overhaul of commission structures and insurance pricing. The paper noted that commission expenses have grown significantly faster than both premium income and other operating costs in recent years and said the proposed reforms are aimed at addressing this imbalance.
Published on October 6, 2026
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