IRDAI weighs January or April start for insurance commission caps

The Insurance Regulatory and Development Authority of India (IRDAI) is considering 1 January or 1 April as start dates for proposed caps on the commissions insurers pay brokers and other distributors, Girija Subramanian, the regulator’s whole-time member for distribution, said in an interview with Bloomberg published on 9 October 2026. Business Standard, which carried the Bloomberg report, headlined the January option as January 2027.

The caps, proposed in a consultation paper in September, would apply to most classes of insurance, including health, life, and property and casualty. Comments on the paper are due by 25 October 2026. IRDAI will then issue draft regulations for a further round of public comment before publishing a final framework, according to the report. The coverage did not set out health-specific limits or the proposed commission percentage for each line of business.

Phasing and incentives

Subramanian said commission caps need a faster approach than the planned reductions in insurers’ management expenses, because phasing caps in could prompt distributors to accelerate sales ahead of each cut and raise the risk of mis-selling. She said getting the reforms right mattered more than introducing them early. Expense reductions would be phased in over five years, with the first interim milestone in the financial year ending March 2029.

The proposals include extra allowances for business written outside large cities. Distributors could earn an additional 10 per cent of the applicable commission limit for business in towns with fewer than 1 million people and 20 per cent in areas with fewer than 50,000 people. IRDAI has also proposed lower entry requirements for distributors and would allow them to take on other financial and non-financial activities.

The regulator’s case and the pushback

IRDAI has said commissions have grown faster than premiums since rules were relaxed in 2023, without a matching rise in coverage. According to the Bloomberg report, which cites IRDAI, private life insurers’ expenses have climbed to about 22 per cent of total premiums from 16 per cent in fiscal 2021, while private general insurers’ expenses have risen to about 32 per cent from 25 per cent in fiscal 2019. Distributor rewards have in some cases added 30 to 60 per cent on top of base commissions.

Shares of PB Fintech, the parent of Policybazaar, fell 36 per cent when the proposals were announced, and Turtlemint Fintech Solutions has since fallen by about half. Analysts estimate the measures could cut fee income for banks and digital brokers by up to 90 per cent in high-margin categories, and Jefferies estimated that the proposed 10 per cent cut in new-business commission rates would reduce earnings at fintech platforms including PB Fintech and Turtlemint by 10 to 12 per cent. The Insurance Brokers Association of India has warned that as many as 1 million jobs could be affected, and brokers are in talks with the regulator. Subramanian rejected concerns about large-scale job losses and said the reforms should create employment by widening the distribution network and easing entry for new participants.

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Analysis by The Healthcare Daily.

• Health insurers that sell retail policies through brokers, banks and web aggregators could face a reset in acquisition costs from as early as January 2027 if the earlier start date is chosen, and with no health-specific limits disclosed, pricing and distribution budgets for the next financial year remain uncertain until draft regulations appear.
• The two-stage process gives insurers and intermediaries a second chance to shape the caps after 25 October, but the regulator’s stated preference for a quick rather than phased cut narrows the room for a gradual transition.
• Extra allowances for business in smaller towns would reward health insurers and intermediaries with distribution outside large cities, in line with the regulator’s argument that higher commissions have not widened coverage.