India’s insurance regulator IRDAI has unveiled sweeping proposals aimed at overhauling policy sales and servicing, risking a shift from volume-driven to value-based advice amid calls for greater transparency and customer protection.
India’s insurance regulator has set out a far-reaching plan to reshape how policies are sold and serviced, and insurers are already warning that the changes could force them to balance efficiency with advice quality and customer support.
The Insurance Regulatory and Development Authority of India (IRDAI) this week proposed reforms covering distribution structures, expenses, commissions, market conduct, transparency and the use of digital infrastructure. The consultation paper, titled “Recalibrating Economics of Insurance Distribution”, is intended to create a more customer-focused and transparent system, but industry executives say the detail will matter as much as the direction. Alok Rungta, managing director and chief executive of Generali Central Life Insurance, said the company was reviewing the proposals closely and wanted clarity on how the framework would weigh distribution efficiency against long-term servicing and wider insurance penetration.
The regulator’s proposals appear designed to curb rising acquisition costs and to push distributors towards more sustainable business models. According to LiveMint, motor insurance commissions have risen sharply in recent years, while premium growth has been far slower, prompting IRDAI to consider tighter rules for motor dealers, lower commissions on mandatory third-party cover and wider use of digital channels such as Bima Sugam. In life insurance, Upstox reported that the regulator wants to bring back product-level commission caps, which were removed in 2023, with limits varying by product type, premium term and distribution channel.
IRDAI is also seeking a broader reordering of the distribution landscape. LiveMint reported that the regulator wants to simplify the structure by grouping participants into three main categories: Insurance Distribution Entities, Insurance Distribution Persons and Market Infrastructure Institutions. It is also proposing tighter Expenses of Management limits, a ban on compulsory bundling of insurance with loans by banks and non-banking lenders, and a shift towards more transparent, data-led supervision. A note from Trilegal said the wider intermediary reforms would move the sector towards continuous oversight, with stronger reporting requirements and traceability of solicitation and servicing across channels.
For insurers and intermediaries, the challenge will be to adapt without weakening advice quality or policyholder support. Amit Goel, director at Equirus Raghnall Insurance Broking, said the proposals could mark a shift from volume-led selling to value-led advisory, with greater emphasis on renewal quality, productivity and servicing efficiency. He added that more transparent and accountable distribution should improve trust and suitability for customers, though the industry will now be watching to see how the final rules are framed after consultation.
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