IRDAI insurance reforms: IBAI warns commission caps could hurt policyholders, jobs and growth

The Insurance Brokers Association of India (IBAI) has raised concerns over the Insurance Regulatory and Development Authority of India’s (IRDAI) proposed reforms to insurance distribution, warning that tighter commission caps and lower expense limits could affect policyholders, employment and insurance growth.

The regulator released its consultation paper, “Reforms for Recalibrating Economics of Insurance Distribution”, on September 23, 2026. IBAI, which represents India’s 798 licensed insurance brokers, said it supports IRDAI’s objectives of improving policyholder protection, increasing transparency and curbing mis-selling. However, it has opposed the proposed framework’s approach to regulating distribution economics.

Commission caps

At the centre of the association’s concerns are more than 30 proposed commission caps across insurance products and distribution channels, along with a proposed one-third reduction in insurers’ overall expense limit.

IBAI said the proposals could disadvantage customers who voluntarily appoint brokers to compare insurance products, negotiate coverage and assist with claims. According to the association, insurance brokers are legally required to act in the interests of customers rather than insurers.

The association also cited IRDAI data showing that 69% of complaints against general insurers relate to claims, while 63% of complaints on the regulator’s portal are decided in favour of customers. IBAI argued that reducing the role and remuneration of customer-appointed brokers could weaken policyholder support during claims.

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Jobs and insurance

IBAI also warned that the proposed changes could affect employment across the insurance distribution ecosystem, particularly in smaller cities and towns.

As of March 31, 2025, insurance brokers sponsored 14.81 lakh of India’s 27.18 lakh point-of-sale persons, according to the association. It said many of these workers are self-employed and operate in Tier-2 and Tier-3 locations.

The association argued that commission caps below the cost of servicing customers could make it commercially difficult for intermediaries to maintain distribution networks in these markets.

It also raised concerns about insurers, saying that a significant reduction in permissible expenses could eventually result in cuts to sales, servicing and claims-related staff.

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IBAI questions commission data

The association said the consultation paper’s own data showed that total expenses of management for general insurers declined from 28.2% of premium in FY2022-23 to 26.5% in FY2024-25, while premium grew by around 13% annually.

IBAI said the apparent increase in reported commissions was partly due to the reclassification of payments previously reported under other expense categories, a change it said the consultation paper acknowledges.

Calls for targeted reforms

IBAI has urged IRDAI to retain the 2023 expense-of-management framework, while strengthening computation rules if required. It has also proposed limiting commission caps to credit-linked and other situations where customers have limited choice, while exempting commercial and large risks.

The association has further called for a regulatory impact assessment before new regulations are drafted. IBAI said it will submit its detailed response to IRDAI by October 25, 2026.

The association said its position is not against reform but seeks measures that, in its view, directly benefit policyholders while preserving insurance distribution and market access.

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