Regulator proposes greater price transparency, tighter commission rules and lower expense limits as it seeks to reshape insurance distribution economics
The Insurance Regulatory and Development Authority of India (IRDAI) has proposed a wide-ranging overhaul of insurance distribution rules that could change how insurers, brokers, banks, NBFCs, digital platforms and agents earn from selling policies.
At the centre of the proposed reforms is a push for greater transparency. IRDAI wants customers to be able to access basic information about insurance products — including premiums, product features, performance and quality-related details — without first being required to provide their phone number, email address or other personal information.
The proposals are part of the consultation paper titled “Recalibrating Economics of Insurance Distribution”, released in September. The regulator is also proposing changes to commissions, expense-of-management limits, distributor incentives, mis-selling controls and the broader structure of insurance distribution. The proposals are still at the consultation stage and could change following stakeholder feedback.
No personal details before seeing insurance prices
One of the most visible proposed changes relates to the way customers obtain information online.
IRDAI has proposed that insurers and distributors should provide product information sheets, FAQs, detailed brochures, premium rates, product performance and quality-related information without requiring prospective buyers to submit their name, mobile number, email address or identification details.
The regulator has described practices that restrict access to basic product information until a customer provides personal details as a form of “dark pattern”.
The objective is to ensure that access to information does not become primarily a lead-generation exercise. Customers would be able to compare products and prices before deciding whether they want to engage with an insurer, agent or distributor.
The proposal also covers information related to claims, insurer performance and grievance redressal, with IRDAI seeking a more standardised and comparable disclosure framework.
Why IRDAI is proposing the overhaul
IRDAI Chairman Ajay Seth has said the broader objective is to improve insurance penetration, affordability and accessibility while reducing the possibility of mis-selling.
The regulator is concerned that customers often face an information gap when comparing insurance products. If prices, product features and performance are difficult to compare, the purchasing decision can become heavily dependent on the distributor or sales channel.
The proposed framework attempts to strengthen the role of price, product suitability and service quality in the purchasing decision.
This comes as India's insurance sector has expanded substantially in terms of premium income but continues to have significant scope for wider coverage.
Commission structure could see major changes
The most consequential part of the proposal for distributors is the proposed restructuring of commissions.
IRDAI has proposed product- and segment-specific commission limits that could vary depending on the type of insurance, distribution channel, product complexity and the effort required to sell and service a policy.
For certain life insurance products, the proposed first-year commission limits would be lower than existing payouts. The consultation paper also proposes different limits for distribution entities and individual agents.
Importantly, these are proposed maximum limits rather than mandatory commission rates.
The regulator's concern is that distributor commissions have increased substantially in some channels relative to the growth in premiums. According to the consultation paper, general insurance premiums generated through brokers increased 37 per cent between FY2023 and FY2025, while commissions increased 173 per cent. In life insurance, premiums generated through corporate agents increased 28 per cent during the period, while commissions increased 125 per cent.
IRDAI has argued that such trends can weaken the role of price and product quality in competition.
Expense-of-management limits also proposed to fall
The reforms go beyond distributor commissions.
IRDAI has proposed a five-year glide path for reducing Expense of Management (EoM) limits.
For life insurers, the proposed limit would move to 15 per cent of gross direct premium income within two years and eventually to 12.5 per cent within five years.
For general insurers, the proposed limit would move to 25 per cent within two years and ultimately to 20 per cent within five years.
The regulator has also proposed changes to the basis on which these expenses are calculated.
For insurers, this could create pressure to improve operating efficiency, particularly for businesses with relatively high distribution and acquisition costs. Smaller insurers could face additional challenges as they attempt to build scale while operating within tighter expense limits.
Banks and NBFCs could also be affected
The proposed changes are not limited to insurance companies and online aggregators.
Banks and NBFCs are important insurance distribution channels, particularly for products sold alongside loans and other financial services.
IRDAI has proposed restrictions on certain volume-linked and reward-linked incentives for employees involved in insurance distribution. It has also proposed measures aimed at preventing compulsory bundling of insurance with loans.
This could affect businesses that generate a meaningful portion of their income from insurance commissions.
Business Standard reported that insurance commissions accounted for a significant portion of profit before tax at some NBFCs, while certain large private banks also have exposure through their insurance-distribution arrangements.
Digital insurance platforms face a key earnings question
Online insurance distributors have been among the businesses most closely watched since the consultation paper was released.
Shares of PB Fintech, the parent of Policybazaar, and Turtlemint fell sharply after the proposals were announced as investors assessed the potential impact on distribution economics.
Business Standard reported that PB Fintech plunged 36 per cent in one session, while Turtlemint fell 20 per cent. Several listed insurers also came under pressure.
Analysts have offered different estimates for the potential financial impact because the final regulations are not yet known.
For example, Jefferies estimated that a 10 per cent reduction in new-business commission rates could translate into a 10–12 per cent decline in PB Fintech's earnings. Other analysts have modelled larger impacts under more stringent interpretations of the draft proposal.
PB Fintech has also indicated that it could respond through cost optimisation and by exploring additional business models, including opportunities closer to insurance manufacturing.
Could lower commissions benefit policy buyers?
From a consumer perspective, the proposed changes could have two broad implications.
First, customers could gain easier access to insurance prices and product information without immediately entering a sales funnel.
Second, lower distribution costs could potentially create room for insurers to reduce premiums, improve product economics or increase the amount of value passed to policyholders.
However, lower commissions do not automatically mean lower insurance premiums.
The final effect will depend on how insurers adjust pricing, distribution costs, marketing expenditure and product structures. Competition among insurers will also determine whether savings are passed through to customers.
Mis-selling rules could become stricter
IRDAI is also seeking to strengthen safeguards against mis-selling.
The consultation framework proposes greater accountability for distributors and sales personnel, along with restrictions on certain incentives that could encourage employees or intermediaries to prioritise sales volumes over customer suitability.
The proposed measures are intended to make the distribution system more closely aligned with the needs of policyholders.
This could be particularly relevant for complex products where customers may find it difficult to assess costs, returns, exclusions and long-term obligations without adequate information.
Bima Sugam and digital infrastructure
The proposed distribution framework also envisages a greater role for digital infrastructure, including Bima Sugam and a Public Insurance Registry.
The broader objective is to create a more transparent digital ecosystem around insurance products, policies and related information.
If implemented effectively, such infrastructure could make it easier for consumers to discover, compare and manage insurance products while also improving the availability of standardised information.
Industry seeks a softer transition
The proposals have already triggered discussions between the regulator and industry participants.
IRDAI Chairman Ajay Seth recently met senior executives from life, general and health insurers. Industry representatives reportedly sought a gradual transition for commission changes, differentiated EoM limits and changes relating to group credit-life products.
This indicates that the final framework could differ from the initial consultation proposals after feedback from insurers, distributors, banks and other stakeholders.
What happens next?
The consultation process is still underway. Stakeholders have until October 25, 2026, to submit comments on the proposals.
Only after the consultation process, regulatory review and finalisation will the eventual rules become clear. The framework could be implemented from January 1, 2027, or April 1, 2027, according to the timeline discussed in the report, but the final effective date will depend on the regulatory process.
Therefore, the current proposals should not be treated as final regulations.
What investors should monitor
For investors, the most important variables will be the final commission caps, the eventual EoM limits, treatment of banks and NBFCs, and whether the regulator provides a phased implementation period.
For insurers, the impact will vary according to their product mix, distribution structure and operating costs. Companies relying heavily on high-cost distribution channels could face greater adjustment requirements.
For digital distributors, commission compression and customer-acquisition costs will remain key variables. At the same time, lower distribution costs across the industry could eventually change pricing and competition dynamics.
Market Outlook
IRDAI's proposed reforms represent a potentially significant change in the economics of India's insurance distribution industry. The immediate market reaction has focused on the possibility of lower commissions and tighter expense controls, particularly for digital distributors, banks and NBFCs with meaningful insurance-related income.
For policyholders, the proposed requirement to make product prices, features and performance information accessible without collecting personal details could improve transparency and comparison.
For investors, however, the key uncertainty remains the final shape of the regulations. Until the consultation process is completed, the extent of the impact on insurer margins, distributor earnings, insurance volumes and customer pricing remains uncertain.
The next major catalysts will be industry feedback, any modifications made by IRDAI and the final notification of the distribution framework.