SBI Life, HDFC Life, Max Financial, LIC: Emkay’s view on high insurance commissions
Emkay sees the possibility of draft commission regulations being released this month with some emphatic provisions toward curbing the predatory commission practices by dominant distributors.
- Jan 9, 2026,
- Updated Jan 9, 2026 9:48 AM IST
High commissions in the insurance sector have recently drawn the attention of the government and regulators, Emkay Global said citing growing concern that distribution and operational costs are limiting insurance penetration and customer benefits. The Sabka Bima Sabki Suraksha Bill, 2025 now gives IRDAI the authority to cap commissions, while the Department of Financial Services has indicated that draft commission regulations are expected soon, it noted.
Emkay Global noted that IRDAI’s FY25 annual report highlighted rising commissions, and the RBI’s December 2025 Financial Stability Review raised concerns that high commissions and operating costs have stagnated insurance penetration and density over recent years. Analysts at Emkay Global said the sector’s high costs persist despite more than 25 years of private participation, and economies of scale have yielded limited benefits for policyholders.
Key areas of concern include extremely high upfront commissions in non-linked savings products, elevated commissions in mandatory Motor TP and credit life insurance, and high renewal commissions in retail health policies. Draft regulations are likely to target predatory practices by dominant distributors, including private banks, large corporate agents, and online platforms.
"We see the possibility of draft commission regulations being released this month with some emphatic provisions toward curbing the predatory commission practices by dominant distributors (private banks, large corporate agents, online platforms), to make the product proposition to customers fairer," Emkay said.
The broking firm said such measures, while potentially disruptive in the short term, are expected to benefit insurers, including LIC, private life insurers, general insurers, and standalone health insurers (SAHI), and make insurance offerings fairer for customers, while distributors face the greatest impact.
For now, Emkay Global has 'Buy' rating on HDFC Life Insurance Company Ltd (target: Rs 850) and SBI Life Insurance Company Ltd (target: Rs 2,300) and 'Add' rating on ICICI Prudential Life Insurance Company Ltd (target: Rs 725), Max Financial Services Ltd (target: Rs 1,900) and Life Insurance Corporation of India (LIC) (target: Rs 1,100).
The brokerage highlighted that high distribution and operational costs remain a structural concern. Over FY15–25, the number of new individual life insurance policies and policies in force has largely remained flat, while commission and operating costs have grown at a compounded annual growth rate of around 9.4 per cent. For private life insurers, total operating costs—including commission—account for roughly 4 per cent of assets under management, a level Emkay Global describes as “unsustainably high.” LIC’s cost profile appears lower due to a larger share of group business and one-off adjustments, but similar cost pressures exist across retail general and health insurance.
Emkay Global emphasised that insurance distribution costs should align with customer value, reflecting either protection offered or savings returns, rather than being determined solely by insurer or distributor profitability goals. While regulators have correctly flagged the high costs, the domestic brokerage said more nuanced analyses are needed, noting that metrics like total premiums alone do not capture the complexity of cost structures across LIC, private insurers, and SAHI.
High commissions in the insurance sector have recently drawn the attention of the government and regulators, Emkay Global said citing growing concern that distribution and operational costs are limiting insurance penetration and customer benefits. The Sabka Bima Sabki Suraksha Bill, 2025 now gives IRDAI the authority to cap commissions, while the Department of Financial Services has indicated that draft commission regulations are expected soon, it noted.
Emkay Global noted that IRDAI’s FY25 annual report highlighted rising commissions, and the RBI’s December 2025 Financial Stability Review raised concerns that high commissions and operating costs have stagnated insurance penetration and density over recent years. Analysts at Emkay Global said the sector’s high costs persist despite more than 25 years of private participation, and economies of scale have yielded limited benefits for policyholders.
Key areas of concern include extremely high upfront commissions in non-linked savings products, elevated commissions in mandatory Motor TP and credit life insurance, and high renewal commissions in retail health policies. Draft regulations are likely to target predatory practices by dominant distributors, including private banks, large corporate agents, and online platforms.
"We see the possibility of draft commission regulations being released this month with some emphatic provisions toward curbing the predatory commission practices by dominant distributors (private banks, large corporate agents, online platforms), to make the product proposition to customers fairer," Emkay said.
The broking firm said such measures, while potentially disruptive in the short term, are expected to benefit insurers, including LIC, private life insurers, general insurers, and standalone health insurers (SAHI), and make insurance offerings fairer for customers, while distributors face the greatest impact.
For now, Emkay Global has 'Buy' rating on HDFC Life Insurance Company Ltd (target: Rs 850) and SBI Life Insurance Company Ltd (target: Rs 2,300) and 'Add' rating on ICICI Prudential Life Insurance Company Ltd (target: Rs 725), Max Financial Services Ltd (target: Rs 1,900) and Life Insurance Corporation of India (LIC) (target: Rs 1,100).
The brokerage highlighted that high distribution and operational costs remain a structural concern. Over FY15–25, the number of new individual life insurance policies and policies in force has largely remained flat, while commission and operating costs have grown at a compounded annual growth rate of around 9.4 per cent. For private life insurers, total operating costs—including commission—account for roughly 4 per cent of assets under management, a level Emkay Global describes as “unsustainably high.” LIC’s cost profile appears lower due to a larger share of group business and one-off adjustments, but similar cost pressures exist across retail general and health insurance.
Emkay Global emphasised that insurance distribution costs should align with customer value, reflecting either protection offered or savings returns, rather than being determined solely by insurer or distributor profitability goals. While regulators have correctly flagged the high costs, the domestic brokerage said more nuanced analyses are needed, noting that metrics like total premiums alone do not capture the complexity of cost structures across LIC, private insurers, and SAHI.