The Insurance Regulatory and Development Authority of India (IRDAI) has proposed stricter commission rules and reductions of around 50% to 66% for some insurance products, with the changes proposed to take effect from FY2028, according to an assessment by Jefferies. The regulator’s consultation paper seeks to link distributor remuneration to factors including product type, distribution channel, policy size, complexity and the effort required to sell and service the policy. The proposals are part of a wider overhaul intended to address rising distribution costs and strengthen policyholder value.
The proposed changes could have implications for NBFCs that earn fee income from insurance distribution. Jefferies identified L&T Finance, Piramal Enterprises and Cholamandalam Investment and Finance Company as having relatively higher exposure to insurance commission income, while Shriram Finance has comparatively lower exposure based on FY2026 insurance commission relative to estimated FY2027 profit. Jefferies expects lower commission rates to create pressure on insurance-distribution economics, particularly for businesses that depend heavily on new-policy commissions.
The wider IRDAI proposal also includes a phased reduction in Expenses of Management (EoM) limits, stronger controls on mis-selling and greater transparency in distributor remuneration. For life insurers, EoM is proposed to move to 15% of Gross Direct Premium Income within two years and 12.5% within five years, while general insurers would move from 30% of Gross Written Premium to 20% of Gross Direct Premium Income over five years. The consultation remains open for stakeholder comments until October 25, 2026, meaning the final provisions could differ from the current proposals.
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