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IRDAI proposes tighter commission caps as distributor payouts rise 125% against 28% premium growth

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IRDAI proposes tighter commission caps as distributor payouts rise 125% against 28% premium growth

IRDAI proposes tighter commission caps as distributor payouts rise 125% against 28% premium growth

The regulator has proposed an all-inclusive commission framework covering incentives, awards, reimbursements and non-cash benefits, with separate caps based on product, channel and distribution effort.

The Insurance Regulatory and Development Authority of India (IRDAI) has proposed a major overhaul of insurance distribution commissions, including hard caps linked to product complexity, distribution channel and the effort involved in selling and servicing a policy. The move comes after the regulator found that distributor remuneration in a representative corporate-agent sample grew 125% between FY23 and FY25, while new business premium increased 28% during the same period. Distributor remuneration grows 4-5 times faster than premium According to IRDAI's consultation paper released today, the sample covers approximately 92% of premium procured through corporate agents. Advt

Distributor remuneration now accounts for nearly 27% of first-year premium, with rewards and incentives adding another 30%-60% over the base commission. IRDAI said this means remuneration is growing four to five times faster than the business on which it is paid, making base commission alone an incomplete measure of the actual cost of distribution. The regulator also found wide variation in effective payouts across products. Effective payouts on ULIPs range from around 5% to nearly 40%, while other savings products attract effective commissions of 29%-60% of first-year premium, exceeding 65% in some cases.

The NBFC corporate agency channel has nearly tripled since FY23, with effective payouts averaging around 42% of new business premium. Around 93% of this business comprises single-premium Group Credit Life products sold at loan origination, while effective payouts on Group Credit Life have risen to around 45%.


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