India’s insurance regulator has proposed a redesign of how insurance is distributed and paid for, combining lower expense limits with revised commissions and stronger protections against mis-selling. The public consultation, released on 23 September 2026, is open for comments until 25 October.
The Insurance Regulatory and Development Authority of India (IRDAI) sets out the changes in Recalibrating Economics of Insurance Distribution. Its official press release describes a phased reform proposal, not a final regulation taking effect immediately. This report explains that release; it does not announce a new notification dated today.
What would change for insurers?
For life insurers, IRDAI proposes calculating the expense-of-management ceiling at company level against gross direct premium income (GDPI). The proposed ceiling would be 15% within two years and 12.5% within five years.
For general insurers, the proposal would move from a ceiling of 30% of gross written premium to 20% of domestic GDPI over five years. Both the percentage and its calculation base would change, so readers should not treat this as a like-for-like ten-percentage-point reduction on an unchanged denominator. The release also proposes reducing insurers’ regulatory fees.
Commission changes are not one universal cap
The proposed commission framework would distinguish between insurance segments, products and distribution channels, taking account of complexity and the work required to sell and service cover. Additional rewards could support sales in underserved locations.
IRDAI also proposes cost audits and controls on indirect payments. Insurers and large distributors would disclose commission policies more clearly, while specified commercial policies would carry commission disclosures. The official consultation documents provide the underlying proposals; the headline should not be read as a single commission rate applying to every policy.
Mis-selling and loan-linked insurance are in focus
Proposed safeguards include documenting customer needs and suitability, strengthening protections against compulsory bundling, and linking the individual seller’s identity to the policy. IRDAI envisages commission clawbacks for mis-selling and restrictions on volume- or reward-linked incentives for bank and non-bank finance company staff selling insurance.
The release also describes tracking misleading interface practices, or dark patterns. These measures address how insurance is sold as well as what distribution costs.
A simpler distribution structure
The regulator proposes three broad categories: Insurance Distribution Entities, Insurance Distribution Persons and Market Infrastructure Institutions. Simpler registration, lower entry requirements and greater business flexibility are intended to widen participation. Bima Sugam and the Public Insurance Registry feature in the proposed digital infrastructure supporting comparison, portability and servicing.
Why capital-market readers should watch
CapKet analysis: Changes to permitted expenses and distributor remuneration could affect insurers’ acquisition costs and intermediaries’ fee income. The direction and size of any earnings effect would depend on each business’s product mix, distribution channels and the final framework. Lower distribution costs do not automatically translate into higher shareholder profits: savings may also improve policyholder value or pricing.
No company-specific earnings forecast or share-price target is established by this release. The relevant next steps are stakeholder feedback, any revised proposals, and subsequent final notifications specifying implementation terms.
What happens next?
IRDAI invites responses through the consultation portal, its prescribed template or email, with a 25 October 2026 deadline. That is the feedback deadline, not the date the proposed limits become law.