While insurers could benefit from lower acquisition costs, distributors warn that steep cuts could weaken their business models. The larger question is whether the savings will reach policyholders or remain with insurers.

The Insurance Regulatory and Development Authority of India ( Irdai )'s proposed overhaul of insurance distribution costs has opened a battle over commissions, transition timelines and the economics of selling policies. Insurers could gain from lower distribution costs, but policyholders may not necessarily benefit unless the savings are passed on through cheaper premiums or better policy value. Banks, NBFCs, brokers and agents are seeking more time to adjust to the proposed commission caps, warning that steep cuts could undermine distribution economics. Bank and non-bank insurance distributors are seeking a three-to-five-year transition to the proposed commission caps, as the Insurance Regulatory and Development Authority of India (Irdai) prepares to overhaul insurance distribution costs. The Finance Industry Development Council (FIDC), which represents NBFCs, has proposed reducing commissions on credit-linked insurance from the current 45-49% to 25% over five years, instead of an immediate reduction to the proposed caps of 2% for single-premium credit-life policies, 2.5% for multi-year credit-life policies and 5% for credit-health policies.

The Confederation of General Insurance Agents Associations of India has sought at least three years, while the Insurance Brokers Association of India has proposed a phased transition aligned with the five-year timeline for insurers' expenses of management (EoM) limits. Smaller and newer insurers have also sought around three years to adjust their cost structures and distribution networks.

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