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IRDAI proposes sweeping insurance distribution overhaul; cuts EoM, caps commissions, targets mis-selling

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IRDAI proposes sweeping insurance distribution overhaul; cuts EoM, caps commissions, targets mis-selling

IRDAI proposes sweeping insurance distribution overhaul; cuts EoM, caps commissions, targets mis-selling

The Insurance Regulatory and Development Authority of India (IRDAI) has proposed a five-year glide path to bring life insurers’ EoM to 12.5% and general insurers’ to 20%, while commission limits will be linked to product complexity, distribution channel and selling effort.

In a public consultation paper released today, the regulator has proposed a five-year glide path to bring down Expenses of Management (EoM), introduce segment- and product-specific commission limits, ease entry into insurance distribution and create digital, pull-based alternatives such as Market Infrastructure Institutions (MIIs). The proposals are aimed at moving the sector away from a distribution model driven primarily by premium acquisition towards one that places greater weight on affordability, persistency, quality of advice, servicing and policyholder outcomes. IRDAI said the reforms seek to create a customer-centric, competitive, efficient and transparent distribution ecosystem. Advt

The regulator's diagnosis is particularly sharp: insurance distribution costs have risen considerably even as the expansion in the number of insured people has remained limited. IRDAI said the 2023 EoM reforms, which gave insurers greater flexibility at the entity level, have not delivered the expected improvement in affordability, insurance penetration and customer value. Distribution costs have instead returned to historically high levels. Distributor payouts growing much faster than business

One of the strongest data points in the consultation paper relates to the life insurance corporate agency channel. In a representative sample covering about 92% of premium procured through corporate agents, new business premium increased 28% between FY23 and FY25 , while total distributor remuneration jumped 125% .


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