IRDAI’s New Insurance Commission Rules Face Pushback From LIC Agents And Brokers
LIC Agents And Brokers Raise Concerns
The Insurance Regulatory and Development Authority of India (IRDAI) has proposed major changes to insurance distribution rules, including new limits on commissions paid to agents and intermediaries.
The proposals have triggered concerns among organisations representing LIC agents and insurance brokers, who argue that lower commissions could affect the livelihoods of agents, reduce insurance distribution in smaller cities and make it harder to provide services to policyholders.
The proposals are currently under consultation, with stakeholders allowed to submit their responses until October 25, 2026.
IRDAI Wants To Change How Insurance Commissions Work
IRDAI’s consultation paper proposes bringing back product-level commission caps that were largely removed in 2023.
The proposed limits would vary depending on the type of insurance, distribution channel, policy duration, product complexity and servicing effort.
For example, proposed first-year commissions for individual health insurance could be capped at 15% for insurance distribution entities and 20% for agents, while renewal commissions could be limited to 5% and 10%, respectively.
For certain life insurance products, proposed commission limits would also be significantly lower than some existing payouts.
LIC Agents Fear Impact On Livelihoods
The Life Insurance Agents’ Federation of India has raised concerns that lower remuneration could make insurance agency work less financially sustainable.
The federation has argued that changes to commission structures should take into account the actual work involved in selling and servicing policies.
It has also sought appropriate grandfathering and transition provisions, particularly for existing policies where agents continue to provide services to customers.
Brokers Question Proposed Commission Caps
The Insurance Brokers Association of India has also opposed several aspects of the proposed framework.
The organisation, which represents hundreds of licensed insurance brokers, has warned that lower commissions combined with tighter expense limits could affect jobs and reduce the ability of insurers and intermediaries to serve customers in smaller towns and cities.
Brokers have also questioned whether independent brokers should receive lower remuneration than tied agents, given that brokers compare policies, negotiate coverage and assist customers with claims.
IRDAI Wants To Curb Mis-Selling
The regulator’s proposals are aimed at reducing excessive distribution costs and addressing concerns around commission-driven sales.
IRDAI has proposed treating monetary and non-monetary incentives, rewards, reimbursements, gifts and certain other payments as part of commission for regulatory purposes.
The framework also proposes restrictions on compulsory bundling of insurance with loans and stronger requirements around transparency and suitability.
Expense Limits Could Also Come Down
The proposed reforms go beyond individual commission caps.
IRDAI is also considering a phased reduction in insurers’ overall Expenses of Management limits. The regulator wants insurance companies to become more cost-efficient while ensuring that savings can ultimately benefit policyholders.
The industry bodies, however, argue that aggressive cost reductions could result in cuts to sales, servicing and claims-related staff.
Final Rules Are Yet To Be Decided
The current proposals are not final regulations. IRDAI is collecting feedback from insurers, agents, brokers and other stakeholders before deciding the final framework.
The regulator is expected to examine the concerns raised by distribution bodies before finalising the rules.
The debate now centres on finding a balance between controlling distribution costs, preventing mis-selling, protecting policyholders and maintaining a large insurance distribution network across India.
Summary
IRDAI’s proposed insurance distribution reforms have triggered concerns among LIC agents and insurance brokers over lower commission caps and tighter expense limits. Industry bodies warn that the changes could affect agent livelihoods, jobs and insurance access in smaller towns. IRDAI says the proposals are intended to control distribution costs, improve transparency, curb mis-selling and strengthen policyholder protection.
