An insurance premium covers expected claims, distribution expenses, administration, technology, regulatory costs and other operating requirements. Commissions are only one component of this cost structure.
Shares of insurers, banks, and non-banking finance companies dropped sharply following proposed commission caps by Irdai.
IRDAI has proposed capping insurance commissions and lowering expense limits to reduce distribution costs and improve value for policyholders.
Proposed health insurance commission caps are 20% for agents and 15% for distribution entities on first-time sales, falling to 10% and 5%, respectively, for renewals.
Lower commissions could help insurers improve margins, invest in services or reduce premiums, but savings will not automatically be passed on to customers.
Lower payouts could affect distribution incentives, particularly in underserved areas, while the impact on premiums will vary by product, claims costs and insurers’ operating expenses.
The Insurance Regulatory and Development Authority of India ( IRDAI ) has proposed capping insurance commissions and reducing insurers’ expense limits to lower distribution costs and improve value for policyholders. But lower payouts to agents, brokers and banks will not automatically translate into cheaper policies, with the eventual impact depending on how insurers adjust premiums, operating costs and distribution strategies. IRDAI has proposed product-specific limits on commissions and a phased reduction in insurers’ expenses of management (EoM). The proposals seek to improve cost discipline, increase transparency and ensure that policyholders receive greater value from the premiums they pay. The deadline for feedback on the proposals has been extended to October 31, 2026. The proposed changes have not yet become final rules.
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