Insurance brokers are opposing the Insurance Regulatory and Development Authority of India’s (IRDAI) proposed changes to distribution norms, warning that caps on commissions paid to banks, brokers and agents could cut their revenues by up to 60-70% and put nearly 1 million jobs at risk.The Insurance Brokers Association of India (IBAI) has raised concerns over the proposals arguing that the changes could disrupt the economics of insurance distribution and create uncertainty for the industry. IBAI has asked for more time until December this year to submit feedback and has urged IRDAI not to introduce hard commission caps without a published impact assessment covering policyholders, employment, public sector insurers and foreign investment, said president of the association Narendra Kumar Bharindwal.
IRDAI proposed the changes in a consultation paper released in late September as part of a overhaul of insurance distribution. The regulator has proposed linking commission levels to the complexity of products and the effort involved in selling them. It has also proposed lower remuneration for products that require limited selling effort, including mandatory insurance covers such as motor third party insurance.
The regulator has argued that the reforms are needed to reduce distribution costs and improve value for policyholders. IRDAI’s data showed that commissions paid through general insurance brokers rose 173% between FY23 and FY25, while premium sourced through brokers increased 37%. Average commission rates rose from 8.5% to 17% over the period.
IBAI, however, has argued that lower commissions for intermediaries would not necessarily translate into lower premiums for customers. The association said the proposed changes could instead shift income away from distributors and insurers’ employees towards insurance company owners, without requiring insurers to pass on the savings to policyholders.
The brokers’ body has also warned of unintended consequences if hard commission caps are introduced. It said insurers could resort to practices such as disguising excess commissions as marketing fees or other payments, potentially bringing back the very practices the regulator is seeking to address.
The association has argued that the proposed overhaul comes at a time when the government has opened the insurance sector to 100% foreign direct investment, and a major change in distribution economics could increase regulatory uncertainty for existing and potential investors.
