3 min readMumbaiUpdated: Oct 1, 2026 11:30 AM IST
Insurance brokers have opposed the Insurance Regulatory and Development Authority of India’s (IRDAI’s) proposed reforms on insurance distribution, warning that the broad commission caps and a one-third cut in insurers’ expense limits could weaken customer service, reduce jobs and slow insurance expansion.
The Insurance Brokers Association of India (IBAI) said the measures could undermine insurance brokers, who are legally required to act in the customer’s interest, unlike tied agents. Brokers compare policies, negotiate coverage and help policyholders with claims. The association questioned why an independently appointed broker should receive less remuneration than an insurer’s tied agent.
It cited regulator data showing 69% of complaints against general insurers relate to claims, while 63% of complaints are decided in customers’ favour.
“Weakening the one participant whose duty runs to the customer cannot serve the customer,” an IBAI spokesperson said.
In its response to IRDAI’s consultation paper, “Reforms for Recalibrating Economics of Insurance Distribution”, IBAI said it supported measures to protect policyholders, improve transparency and curb mis-selling. These include a ban on compulsory insurance bundling with loans, enforceable suitability requirements, commission clawbacks in proven mis-selling cases, disclosure of related-party payments and identity tagging of salespersons.
However, the main objection of brokers is to the proposed framework’s more than 30 commission caps across products and distribution channels, along with the proposed reduction in insurers’ overall expense limit.
Impact on costs, jobs and insurance access
IBAI also challenged the basis for the proposed caps. It said IRDAI’s figures show that general insurers’ total expenses of management fell from 28.2% of premium in 2022-23 to 26.5% in 2024-25, even as premiums grew by about 13% annually.
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The association said the reported rise in commissions was mainly driven by the reclassification of payments from other expense heads — an issue it said was acknowledged in the consultation paper. Instead of blanket caps, IBAI recommended conduct and fair-value rules for segments where customers have limited choice.
The association warned that the proposals could also affect employment and insurance access in smaller towns. As of March 31, 2025, brokers sponsored 14.81 lakh of India’s 27.18 lakh point-of-sale persons and 16,230 of 26,316 motor insurance service providers. Many are self-employed operating in Tier-2 and Tier-3 towns.
IBAI said commissions below the cost of servicing customers could force distributors to leave smaller markets. It also warned that cutting insurers’ expense limits by more than 30% over five years could lead to reductions in sales, servicing and claims staff.
IBAI urges retention of 2023 expense framework
According to IBAI, reduced distribution reach could undermine the government’s “Insurance for All by 2047” target. It questioned replacing the 2023 framework before its scheduled 2028 review and without a regulatory impact assessment, particularly after the sector was opened to 100% foreign investment.
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IBAI has urged IRDAI to retain the 2023 expense-management framework, limit commission caps to credit-linked and other coerced-choice sales, exempt commercial and large risks, and publish a regulatory impact assessment before drafting regulations.
The association said it would submit its detailed response by October 25, adding that its opposition was not to reform but to measures that, in its view, may not deliver tangible benefits to policyholders.
