IRDAI insurance rules could see major changes after the regulator proposed a broad overhaul of how insurance products are sold, distributors are paid and expenses are controlled.
The proposals also seek to prevent compulsory insurance bundling with loans and strengthen safeguards against mis-selling.
The Insurance Regulatory and Development Authority of India (IRDAI) released a consultation paper covering distribution structures, commissions, expenses, market conduct, transparency and digital insurance infrastructure.
The proposals are not final rules, and stakeholders have been invited to submit comments until October 25, 2026.
IRDAI Insurance Rules May Bring Commission Caps
One of the key proposals is to bring back product-wise limits on commissions paid to insurance distributors.
The proposed limits would vary depending on the insurance product, distribution channel, policy size and the effort involved in selling and servicing the policy.
For individual health insurance, IRDAI has proposed first-year commissions of around 15% for distribution entities and 20% for agents. Renewal commissions are proposed at 5% and 10%, respectively.
For certain life insurance products with a premium payment term of 10 years or more, the proposed first-year commission would be capped at 20% for distribution entities and 25% for agents, with lower limits proposed for shorter payment terms.
The framework would also introduce different limits for various general insurance products.
For motor third-party insurance, the proposed distributor commission is zero, while agents and associates could receive 2.5%.
No Compulsory Insurance With Loans
Another major proposal targets the practice of linking insurance with loans and other credit products.
IRDAI has proposed prohibiting compulsory bundling while allowing combinations of insurance and credit products that meet acceptable conditions.
The consultation paper also proposes separate, lower commission limits for some insurance products sold along with loans or credit.
The stated objective is to reduce incentives that could contribute to mis-selling and make the cost of insurance distribution more transparent.
The regulator has also proposed prohibiting volume-linked or reward-linked incentives for bank and non-bank financial company employees involved in selling insurance.
This is part of a wider set of measures aimed at strengthening accountability in insurance distribution.
Insurance Sellers Could Face More Accountability
Under the proposed framework, the identity of the individual selling a policy would be linked to the policy.
IRDAI has also proposed maintaining information on mis-selling incidents and allowing commission clawbacks when mis-selling is established.
The proposals seek greater disclosure of distributor remuneration as well.
Insurers and large distribution entities would have to present their commission policies and structures in simple language, giving customers more visibility into how distributors are paid.
IRDAI has also proposed documenting customer needs and suitability while bringing direct and indirect remuneration, including monetary and non-monetary benefits, within the regulatory definition of commission.
What the Proposed Changes Mean for Customers
The proposals also include tighter limits on insurers’ management expenses.
For life insurers, IRDAI has proposed bringing the company-level Expense of Management limit to 15% within two years and 12.5% within five years.
For general insurers, the proposed limit would progressively move from the existing framework towards 20% of domestic gross direct premium income over five years.
IRDAI has also proposed greater use of digital infrastructure, including Bima Sugam and the Public Insurance Registry, to support comparison, portability, purchase and servicing of insurance policies.
These are consultation proposals rather than final regulations. The regulator is seeking stakeholder feedback before deciding on the final framework, so the provisions could change during the consultation process.
