Page 12 - The Insurance Times February 2026

Laws) Bill, 2025. The amendments
empower the regulator to frame Government considering tweaks to insurance com-
stricter rules on commission disclosure, mission structure
remuneration limits and conflicts of in- The government is evaluating changes to the commission structure for in-
terest in insurance distribution. surance distributors, including banks, corporate agents, individual agents and
Under changes to Section 40 of the aggregators, amid concerns that high acquisition costs are hurting
affordability and insurance penetration.
Insurance Act, 1938, IRDAI can now
prescribe how commissions paid to M Nagaraju, Secretary in the Department of Financial Services, said regula-
agents and intermediaries are struc- tory and policy-level discussions are underway to review distributor commis-
tured, capped and disclosed to policy- sions. The issue has gained urgency after the government rationalised goods
holders. This opens the door for man- and services tax on individual life and health insurance premiums to zero,
datory disclosure of commission compo- even as premiums remain elevated due to high distributor payouts.
nents embedded in insurance products, A committee under the Life Insurance Council has reportedly recommended
enhancing transparency for customers. capping or deferring commissions to reduce upfront acquisition costs. At
present, insurers have flexibility to fix product-wise commissions as long as
The Bill also strengthens conflict-of-in-
terest provisions, particularly in they remain within overall expense limits.
bancassurance. Directors or officers of The Reserve Bank of India's Financial Stability Report has also flagged high
insurers are barred from holding simi- distribution costs as a constraint on expanding insurance coverage, noting
lar positions in banks or investment the gap between insurance density and penetration. Policymakers see com-
companies, limiting the scope for mission reform as a key lever in advancing the "Insurance for All by 2047"
board-level influence over product dis- objective by improving affordability and curbing mis-selling incentives.
tribution. For intermediaries such as
brokers and web aggregators, the
The regulator has sought detailed ex- alone climbed 18 per cent year-on-year
regulator will enforce restrictions
planations from these entities on vio- to Rs 60,800 crore. In the non-life seg-
through regulations and fit-and-proper lations of the IRDAI (Expenses of Man- ment, gross commission expenses in-
norms.
agement, including Commission of In- creased to Rs 47,266 crore from Rs
Together, these measures significantly surers) Regulations, 2024. The frame- 39,601 crore in FY24.
enhance IRDAI's ability to address mis- work sets expense caps based on the
The heightened scrutiny reflects the
selling, align distributor incentives with nature of products, premium-paying
regulator's broader push to rein in dis-
policyholder interests, and push the terms and duration of business. IRDAI tribution costs, strengthen compliance
industry towards cleaner governance is currently reviewing submissions and
discipline and ensure that customer
and fairer sales practices. is expected to follow a structured su-
interests are not compromised by
pervisory process, including hearings, aggressive commission-driven sales
23 insurers under IRDAI before deciding on any penal action. practices. T
Regulatory concern has intensified fol-
lens for breaching expense lowing a sharp rise in commission
limits payouts during FY25. Overshooting ex- Join

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ment Authority of India has placed 23 signals non-compliance but may also Course on
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tion include eight life insurers and 15 ment rose to Rs 1.38 lakh crore in FY25,
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ing to sources familiar with the matter. gross premiums. Commission payouts

The Insurance Times February 2026 11