Page 10 - The Insurance Times October 2025

IRDAI mulls mutual fund- with consumer protection, while ensur- the accused under sections related to
ing long-term sectoral growth. cheating, forgery, and criminal breach
style commission cap to of trust. An internal investigation into

curb high payouts IRDAI official arrested for the lapses in financial oversight is likely
The Insurance Regulatory and Develop- Rs. 5.3 crore embezzle- to follow.
ment Authority of India (IRDAI) is re-
portedly exploring a mutual fund-style ment Draft FDI norms may ease

cap on insurance commissions to rein in An Assistant Manager at IRDAI, compliance burden in in-
excessive payouts to distributors. Bhaskarabhatla Suryanarayana Sastry,
Sources indicate that the regulator is has been arrested for allegedly embez- surance sector
reviewing the possibility of introducing zling Rs. 5.3 crore through forged in- The government has released draft
uniform commission limits, similar to voices and manipulated financial docu- amendments to the Indian Insurance
what is followed in the mutual fund in- ments. Employed in the general admin- Companies (Foreign Investment) Rules,
dustry, where commission payouts are istration department, Sastry report- 2015, aimed at easing compliance for
capped to protect investor interests edly created fake office notes and quo- foreign investors. The proposed
and promote transparency. tations, submitting fraudulent payment changes remove the requirement that
files with his and his family's bank ac- a majority of directors and key man-
The move comes amid rising concerns
count details in place of legitimate agement personnel (KMPs) must be
about high upfront commissions, par- resident Indian citizens, a condition
ticularly in life and health insurance vendors. seen as restrictive by global insurers.
segments, which may sometimes lead The payments were processed after
to mis-selling. Currently, insurers enjoy receiving approvals from higher offi- However, the draft retains the stipulation
flexibility under the Expenses of Man- cials, who were unaware of the decep- that at least one among the CEO, MD,
agement (EOM) framework, which re- tion. According to the FIR filed, Sastry's or chairperson must be a resident Indian.
placed rigid commission caps. How- premeditated actions went undetec- Other clauses requiring 50% of the board
ever, IRDAI is now considering whether ted for a prolonged period, resulting in to be independent directors and main-
a recalibration is needed to ensure significant financial losses for the regu- taining strong financial metrics for for-
eign-owned insurers still apply if foreign
customer-first practices. latory body.
investment exceeds 49%.
Industry players are expected to be The case raises questions over IRDAI's
Legal experts say these changes could
consulted, and any proposed cap will internal checks and balances. Law en-
aim to balance distributor incentives forcement authorities have charged improve India's attractiveness as an
investment destination without com-
promising governance. While the 2021
IRDAI mulls mutual fund-style commission cap to hike in FDI cap to 74% didn't bring
major inflows due to compliance con-
rein in high insurance payouts cerns, the current move may provide
The Insurance Regulatory and Development Authority of India (IRDAI) is con- global insurers greater flexibility and
sidering implementing a mutual fund-style cap on insurance commissions to operational clarity.
address the issue of disproportionately high payouts to intermediaries,
sources told CNBC-TV18. This move aims to align insurance distribution costs Join
with investor protection norms followed in other financial sectors.
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Currently, some insurers offer commissions as high as 40%, especially in low-
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affordability. A cap similar to that in the mutual fund industry-where upfront
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pricing for consumers.
IRDAI had liberalized commission norms in April 2023 under a "total ex- Loss
pense" ceiling, but concerns remain around lack of standardization and scope
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10 October 2025 The Insurance Times