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How IRDAI wants to curb insurance commissions, crack down on mis-selling

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How IRDAI wants to curb insurance commissions, crack down on mis-selling

The regulator has proposed product-wise commission limits, tighter controls on bank and NBFC sales incentives, seller-level tracking of mis-selling and commission clawbacks, as distributor remuneration rose 125% against 28% growth in new business premium between FY23 and FY25.

The Insurance Regulatory and Development Authority of India (IRDAI) has proposed a sweeping reset of insurance distribution economics, with product-wise commission caps and new safeguards aimed at curbing mis-selling, in its latest consultation paper released on Wednesday. Here are the important highlights from the consultation paper on commissions & misselling: Distributor payouts up 125%: Total distributor remuneration rose 125% between FY23 and FY25, against 28% growth in new business premium in a representative sample covering around 92% of premium procured through corporate agents. Distributor remuneration now accounts for nearly 27% of first-year premium, with rewards and incentives adding another 30%-60% over base commission. Advt

Hard commission caps proposed: IRDAI has proposed product- and channel-specific maximum commission limits after commission caps were removed in 2023. The proposed rates would vary by product complexity, distribution channel and effort involved, with mandatory or easy-to-sell products attracting lower commissions. Mis-selling could hit the seller’s commission: The regulator has proposed linking the functional identity of salespersons, PoSPs, agents and associates to policies sold by them. Mis-selling incidents would be placed in the public domain through the proposed Public Insurance Registry and could trigger commission clawbacks.

Bank, NBFC sales incentives face curbs: IRDAI has proposed bringing direct and indirect monetary and non-monetary remuneration within the definition of commission and prohibiting volume- or reward-linked incentives for bank and NBFC staff selling insurance, including trips, luxury gifts, milestone bonuses and contest rewards.


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