Life insurers with a higher proportion of credit-life business in Annualised Premium Equivalent (APE) could benefit from the Insurance Regulatory and Development Authority of India’s (IRDAI) proposed changes to insurance commission rates, according to a Centrum report. Under the proposed framework, commissions for credit-life products could fall to 2%, potentially reducing distribution costs for insurers with greater exposure to this segment. Centrum expects the changes to encourage insurers to focus more on retail protection products, maintain leaner expenses and adjust their business strategies as distributors respond to lower payouts.
The proposed framework would also tighten Expense of Management (EoM) limits for life insurers to 15% of Gross Direct Premium Income within two years from FY28 and 12.5% within five years. Commission limits would vary according to product structure, policy duration and distribution channel, with proposed rates ranging from 25% for individual agents selling policies of 10 years or more to 2%–10% for certain single-premium policies. Marketing allowances, infrastructure support and travel incentives would also fall within statutory commission limits, reducing the scope for indirect payouts outside the prescribed framework.
The proposals also target mis-selling in bancassurance and NBFC-led distribution. Financial institutions would be prohibited from linking loan approval to the purchase of insurance, while volume-linked bonuses, international trips, contests and gifts for bank and NBFC employees would be prohibited. The proposals remain subject to the regulatory process, but they could materially alter insurance distribution economics and encourage greater emphasis on cost efficiency, retail protection and sustainable distribution models.
Want to deepen your expertise beyond today’s news?
Explore practical certification courses designed for banking, risk, insurance, compliance, ESG, AI, and emerging technologies professionals.
Learn from industry experts and earn certifications from RMAI and BFSI Sector Skill Council of India.
#Insurancenews
