Irdai proposes strict commission caps and expense limits amid broker backlash

In a new consultation paper, the Insurance Regulatory and Development Authority of India proposes imposing strict product-by-product commission caps and reducing insurers’ expense-of-management limits by roughly one-third. The Insurance Brokers Association of India, representing 798 licensed brokers, contends that the reforms could endanger at least one million livelihoods and ultimately harm consumers. The regulator points to data showing that, after the 2023 deregulation, motor insurance premiums grew 34 % while broker commissions surged 259 %, and health broker premiums rose 53 % with commissions up 118 %.

To address cost inefficiencies, Irdai plans to launch the Bima Sugam digital marketplace and the Public Insurance Registry, aiming to increase transparency and lower distribution costs. Critics argue that simultaneous cuts to commissions and corporate expenses may stifle growth, urging the regulator to consider expanding intermediaries’ product scope and easing brokerage capital requirements. The debate highlights the tension between curbing mis-selling and preserving a viable distribution workforce as India pursues its “Insurance for All by 2047” goal.