IRDAI New Insurance Rules could bring major changes to insurance commissions, insurer expenses and online sales practices under proposals released by the regulator on September 23.
The consultation is open for stakeholder comments until October 25, so the proposals are not final yet.
The proposed changes cover insurance companies, agents, brokers and online distributors.
IRDAI has proposed lower expense limits, a revised commission framework and stronger safeguards against misleading digital practices.
IRDAI New Insurance Rules Could Lower Expenses
For life insurers, IRDAI has proposed bringing company-level Expenses of Management down to 15% of Gross Direct Premium Income within two years and 12.5% within five years.
For general insurers, the regulator has proposed changing the benchmark from Gross Written Premium to domestic Gross Direct Premium Income.
The limit could gradually fall from 30% to 20% over five years.
IRDAI said the proposed framework is intended to reduce insurance costs, expand the risk pool in general insurance and improve value for policyholders, particularly in life insurance savings products.
Insurance Commission Structure May Change
The proposed commission framework would move away from a uniform approach.
Commission limits could vary according to the insurance segment, product type, distribution channel, product complexity and the effort involved in selling and servicing a policy.
For individual non-linked and linked life insurance products, the proposal includes intermediary commission ranges of 5% to 20% and agent commission ranges of 6.25% to 25%, depending on the premium payment term.
For individual pure-term products, the proposed first-year commission is 25% for intermediaries and 30% for agents.
Renewal commissions have been proposed at 7.5% and 10%, respectively.
Insurance Websites Face Dark Pattern Crackdown
Another major proposal targets dark patterns on insurance websites.
IRDAI has proposed stopping insurers and distributors from requiring customers to provide personal details simply to access basic product information, features or pricing.
The regulator has also proposed stronger safeguards against mis-selling.
These include making suitability an enforceable obligation, documenting customer needs for specified life insurance sales and maintaining an audit trail.
The proposals could make it easier for consumers to research insurance products online without first being pushed into a sales lead process.
However, the final rules could change after the consultation process.
What Happens Next
Stakeholders can submit comments on the consultation proposals until October 25.
IRDAI may consider the feedback before deciding the final framework and notifying any new regulations.
The proposed changes therefore should not be treated as final commission or expense limits.
Their eventual impact on insurers, distributors and policyholders will depend on the regulations that IRDAI ultimately notifies.
