Insurance distribution under IRDAI lens: Why certified advisers can help consumers choose wisely
IRDAI’s proposed curbs on insurance commissions and distribution expenses could change how insurers, banks, NBFCs and digital platforms sell policies. For consumers, the proposed changes also highlight the importance of understanding coverage, exclusions and suitability before choosing an insurance policy.
- Sep 25, 2026,
- Updated Sep 25, 2026 1:09 PM IST
India’s insurance market has expanded, but rising premiums and distribution costs have renewed questions over whether consumers are getting adequate value from their policies. Against this backdrop, the Insurance Regulatory and Development Authority of India (IRDAI) has proposed tighter rules on insurers’ expenses and distributor remuneration, changes that could reshape how insurance is sold.
In its consultation paper on distribution reforms, IRDAI has proposed a five-year glide path to reduce insurers’ Expense of Management (EoM). For life insurers, EoM would fall to 15% of premium within two years and 12.5% within five years. For general insurers, the proposed limits are 25% within two years and 20% within five years, compared with the current overall limit of 30%.
The proposals also include segment-specific commission caps, tighter rules for bancassurance and NBFC-led distribution, restrictions around loan-linked insurance and a commission clawback mechanism in cases of mis-selling. The changes have raised concerns among banks, NBFCs and digital insurance distributors that earn significant fees from insurance sales.
Why adviser guidance can matter to consumers
Against this changing distribution landscape, the role of a certified insurance adviser can become more relevant for consumers—particularly where policies involve multiple terms, exclusions and protection needs. However, an adviser does not replace the need for consumers to compare products and understand costs.
ALSO READ: Insurance commission caps: What happens to your policy when the seller earns less?
Sanjiv Bajaj, Joint Chairman & MD, Bajaj Capital, said consumers should not view insurance simply as an online-versus-adviser choice. “Buying insurance online can work well when the need is simple and the customer already understands what kind of protection they are looking for,” he said.
But where there are several factors to assess, including existing family or employer cover, exclusions and the suitability of the policy, an adviser can help put product features into context.
MUST READ: PB Fintech shares crack 36% to hit 52-week low after Irdai consultation paper; more pain ahead?
Focus shifts from commissions to protection needs
This becomes important as commission structures come under greater regulatory scrutiny. Consumers may increasingly need to focus on whether a policy fits their actual protection requirements rather than choosing a product based primarily on price or sales pitch.
An adviser can assess income, dependents, liabilities, existing insurance and employer-provided cover before identifying a genuine protection gap. For life insurance, this could include income replacement, outstanding loans and future financial responsibilities. For health insurance, family needs, location, healthcare costs and existing coverage can influence the appropriate level of protection.
Understanding exclusions, waiting periods and claims
Policy fineprint is another area where advice can add value. Bajaj said advisers can help consumers understand exclusions, waiting periods, claim requirements and riders, while also highlighting differences between policies that may not be obvious from headline premiums.
Ultimately, the proposed IRDAI changes are aimed at bringing greater discipline to insurance distribution and costs. For consumers, the reforms also underline the importance of looking beyond premium comparisons and understanding what a policy actually covers, what it excludes and whether it meets their needs.
MUST READ: Insurance penetration at 3.7%: Where India’s biggest protection gap lies
DO READ: Insurance commissions may fall: What IRDAI’s new distribution rules mean for policyholders
India’s insurance market has expanded, but rising premiums and distribution costs have renewed questions over whether consumers are getting adequate value from their policies. Against this backdrop, the Insurance Regulatory and Development Authority of India (IRDAI) has proposed tighter rules on insurers’ expenses and distributor remuneration, changes that could reshape how insurance is sold.
In its consultation paper on distribution reforms, IRDAI has proposed a five-year glide path to reduce insurers’ Expense of Management (EoM). For life insurers, EoM would fall to 15% of premium within two years and 12.5% within five years. For general insurers, the proposed limits are 25% within two years and 20% within five years, compared with the current overall limit of 30%.
The proposals also include segment-specific commission caps, tighter rules for bancassurance and NBFC-led distribution, restrictions around loan-linked insurance and a commission clawback mechanism in cases of mis-selling. The changes have raised concerns among banks, NBFCs and digital insurance distributors that earn significant fees from insurance sales.
Why adviser guidance can matter to consumers
Against this changing distribution landscape, the role of a certified insurance adviser can become more relevant for consumers—particularly where policies involve multiple terms, exclusions and protection needs. However, an adviser does not replace the need for consumers to compare products and understand costs.
ALSO READ: Insurance commission caps: What happens to your policy when the seller earns less?
Sanjiv Bajaj, Joint Chairman & MD, Bajaj Capital, said consumers should not view insurance simply as an online-versus-adviser choice. “Buying insurance online can work well when the need is simple and the customer already understands what kind of protection they are looking for,” he said.
But where there are several factors to assess, including existing family or employer cover, exclusions and the suitability of the policy, an adviser can help put product features into context.
MUST READ: PB Fintech shares crack 36% to hit 52-week low after Irdai consultation paper; more pain ahead?
Focus shifts from commissions to protection needs
This becomes important as commission structures come under greater regulatory scrutiny. Consumers may increasingly need to focus on whether a policy fits their actual protection requirements rather than choosing a product based primarily on price or sales pitch.
An adviser can assess income, dependents, liabilities, existing insurance and employer-provided cover before identifying a genuine protection gap. For life insurance, this could include income replacement, outstanding loans and future financial responsibilities. For health insurance, family needs, location, healthcare costs and existing coverage can influence the appropriate level of protection.
Understanding exclusions, waiting periods and claims
Policy fineprint is another area where advice can add value. Bajaj said advisers can help consumers understand exclusions, waiting periods, claim requirements and riders, while also highlighting differences between policies that may not be obvious from headline premiums.
Ultimately, the proposed IRDAI changes are aimed at bringing greater discipline to insurance distribution and costs. For consumers, the reforms also underline the importance of looking beyond premium comparisons and understanding what a policy actually covers, what it excludes and whether it meets their needs.
MUST READ: Insurance penetration at 3.7%: Where India’s biggest protection gap lies
DO READ: Insurance commissions may fall: What IRDAI’s new distribution rules mean for policyholders