IRDAI has proposed a new commission structure where payments will be determined based on distribution channel, product category, customer life cycle, and an all-inclusive commission framework.
Insurance brokers have opposed the provision to close the commission in the new proposals issued by the Regulatory Insurance and Development Authority of India (IRDAI) to reform the economic distribution of the industry, arguing that the move will lead to lower profits and significant job losses in 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 is not in place anywhere else in the world and that “untested” improvements require more consultation and more deliberation.
reduce the Commission
At the heart of the opposition is the proposed commission reduction. The Insurance Brokers Association of India (IBAI) said the move could reduce the industry’s profitability and could threaten the livelihood of nearly one million (10 lakh) people working in the insurance distribution ecosystem.
“Our concern is that the paper’s central approach, which includes more than 30 commission caps between products and distribution channels, plus a one-third reduction in the overall cost limit of the insurance company, will harm the policyholders who want to be protected. Cost savings will be effectively transferred from the employees of distributors and insurance companies to the owners of the insurance company,” said the policy holder to ensure that the IBA does not have a mechanism to provide policies. to the Prime Minister’s Office.
The association also questioned whether the proposed measures would increase the choice and freedom of policyholders. It expressed doubt that the cost reductions from the new framework would be passed on to customers.
IRDAI has proposed a new commission structure where payments will be determined based on distribution channel, product category, customer life cycle, and an all-inclusive commission framework.
In its representation, IBAI also suggested that the methodology for calculating the Expenditure of Management (EoM) should remain unchanged from the 2023 framework, although the calculation rules could be tightened. However, IRDAI has proposed a revision of the EoM framework with the aim of reducing the overall cost of insurance companies. This marks a departure from the 2023 regulations.
EoM representative
EoM represents the portion of the insurance policy price that is allocated to the insurance company’s administrative and operating costs. A lower EoM rate is generally considered beneficial for policyholders, as it improves pricing efficiency.
Brokers further suggested that if the insurance company’s claims ratio falls below the prescribed threshold, say 65 percent, or if there are policies that cannot be sold, the insurer should be required to refund part of the premium or reduce the renewal premium. The association points out that similar mechanisms are already in place in schemes such as PMFBY and Ayushman Bharat.
The insurance regulator published its consultation paper in September 2026, proposing a complete overhaul of the commission structure and insurance pricing. The paper notes that commission costs have been rising faster than premium income and other operating costs in recent years and says the proposed reforms are aimed at addressing this imbalance.
Published on October 6, 2026