China cut bancassurance commissions 30%: Could India see a similar insurance reset?

China’s experience with a regulatory overhaul of bancassurance offers a possible template for understanding what could happen in India if insurance distribution costs are reset. The reforms initially put pressure on sales and forced banks and insurers to renegotiate distribution economics, but the channel subsequently recovered, according to a JPMorgan analysis.

China introduced a major regulatory reset in August 2023, including rules aimed at ensuring consistency between the commission rates and cost structures reported to the regulator and actual sales practices. The changes resulted in an average 30% reduction in bancassurance commissions, according to comments by the regulator cited in the JPMorgan report.

The immediate impact was disruptive. Banks and insurers had to renegotiate distribution agreements as the economics of selling insurance through bank branches changed. This weighed on sales momentum, particularly in the second half of 2023 and the fourth quarter.

However, the longer-term outcome was different. According to JPMorgan, product margins improved after the regulatory reset, while bancassurance subsequently made a significantly higher contribution to new business value (NBV). Since the second half of 2024, the channel has again emerged as an important growth engine.

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China’s reforms went beyond commissions

The commission reduction was only one part of the broader regulatory changes. In March 2024, China moved towards an open-architecture model by removing a rule that had limited each bank branch to products from no more than three insurers.

Further measures addressed expenses outside reported fees. From March/April 2026, insurers were required to explicitly disclose related expenses in product filings, according to the JPMorgan analysis.

The changes altered competitive dynamics across the insurance industry. Larger insurers with stronger distribution networks, balance sheets and established brands captured a disproportionate share of the subsequent recovery.

Smaller insurers that had previously competed by offering banks higher acquisition costs lost market share after regulation reduced the effectiveness of that strategy, the report said.

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What could it mean for India?

JPMorgan expects similar dynamics to potentially emerge in India over the next two to three years following a regulatory reset of insurance distribution costs.

For insurers and banks, the initial phase could involve renegotiation of distribution agreements and pressure on sales as the economics of bancassurance change. Over time, however, the China experience suggests that lower distribution costs could alter product margins and competitive positioning.

The experience also highlights that the impact may not be uniform across insurers. Companies with stronger distribution capabilities, financial strength and established brands could be better positioned if competition based on high acquisition costs becomes less effective.

For India, therefore, the key question is not only how much commissions change, but how a reset in distribution economics reshapes bancassurance, insurer margins and market shares over the longer term.

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