India’s insurance regulator, IRDAI, is pushing for a comprehensive overhaul of distributor payments to enhance policyholder interests, amidst rising payouts and expenses since recent reforms, with new rules open for public consultation.
India’s insurance regulator is moving to overhaul how insurers pay distributors, arguing that the market has drifted away from the policyholder-first aims of recent reforms. Ajay Seth, chair of the Insurance Regulatory and Development Authority of India, said the push to revise commission rules and expenses of management limits is intended to restore discipline after a 2023 framework gave firms more freedom but was followed by a sharp rise in payouts and operating costs. According to Seth, commissions have risen faster than premiums in several segments, while total expenses have climbed at both private life and private general insurers, prompting the regulator to rework the economics of distribution rather than simply cut costs for their own sake.
The changes are being framed as part of the broader Sabka Bima Sabki Raksha insurance law reforms, which the industry has been asked to help translate into detailed regulation. Business Standard reported earlier this year that Irdai planned to draft new rules and amend existing norms within six months of the law taking effect on 5 February 2026, after the legislation was notified on 21 December 2025. Seth said the current proposal is only a consultation paper and that the regulator is open to alternative ideas, provided they are supported by sound business logic and clearly serve policyholder interests. He added that the draft rules will go out for another round of public comment before they are finalised.
Seth has also been trying to calm market nerves after investors reacted sharply to the proposed changes. He said the regulator is not targeting any individual company or business model, but does expect firms that rely heavily on high distribution payments to reassess their economics. The aim, he said, is for insurers to compete on price, product quality, claims service and customer outcomes, rather than on how much they can spend to win distribution. The planned reduction in expenses of management is being designed as a phased glide path, rather than an abrupt reset, to give insurers and intermediaries time to adapt.
The wider reform package also includes a stronger push towards greater transparency in the sector. Seth said Bima Sugam, the digital marketplace being built as part of the new insurance infrastructure, is expected to go live within four to six months and is meant to function as a commission-neutral platform. Moneycontrol has separately reported that he indicated a launch by November 2026. Paired with the Public Insurance Registry, the platform is intended to give customers comparable information on products, premiums, benefits, exclusions, insurer performance and claims experience, making it easier for buyers to compare offers and reduce reliance on distributors.
Seth also linked the commission overhaul to a broader regulatory reset that includes claims management, grievance handling and product changes planned for fiscal 2027-28. He said Irdai wants predictable regulation, but not at the expense of frameworks that fail to deliver their intended results. The regulator is also looking to deepen the use of insurers’ long-term capital by expanding investment routes into infrastructure vehicles such as infrastructure investment trusts and real estate investment trusts, while still protecting policyholders and maintaining prudent asset-liability management.
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