Buy a new car in India and pay Rs 50,000 for motor insurance. Industry executives say Rs 20,000 to Rs 30,000 of that can go to the dealer or intermediary who sold you the policy. The risk cover you actually bought costs far less.
That gap sits at the centre of the biggest rewrite of insurance commission rules India has seen since 2023. The Insurance Regulatory and Development Authority of India (IRDAI) has put a disclosure draft on the table, and a much larger distribution reform paper is expected within weeks. Together they will reset how agents earn, how insurers budget, and how aggregators build their business models.
Here is what is actually on paper, what is still rumour, and what each side of the market should plan for.
What IRDAI Has Officially Proposed
In late June 2026, IRDAI released a consultation paper on the draft IRDAI (Insurance Intermediaries) (Amendment) Regulations, 2026. The draft aligns intermediary rules with the Sabka Bima, Sabki Raksha (Amendment of Insurance Laws) Act, 2025, which came into force on 5 February 2026.
The headline proposal is disclosure, not caps.
Any intermediary earning more than Rs 10 crore in commission in a financial year would have to disclose, every year, the commission it earned, its related party transactions, its profits and any dividend repatriated. Those disclosures go to IRDAI and get published on the intermediary's own website. This is the first time the regulator has asked distributors for public numbers of this kind.
The draft covers every category: corporate agents, brokers, web aggregators, insurance marketing firms and common service centres.
Other changes in the same draft:
- Perpetual registration. Broker and corporate agent certificates would stay valid indefinitely, subject to an annual fee, instead of expiring every three years. Existing corporate agents apply once more, pay a Rs 10,000 application fee, then move to the perpetual regime.
- Policy-level accountability. Every policy gets tagged to the named individual who sold it, with Aadhaar or PAN details of the salesperson on record.
- Lighter certification load. The requirement for corporate agents to ensure each specified person holds a three-year IRDAI certificate goes away, as does the need to file certification numbers.
- Cleaner financials. Brokers must show insurance intermediation revenue in a separate schedule and file audited statements with IRDAI by 30 September each year. Foreign-owned intermediaries file related party details quarterly.
- Naming rule. Entities whose principal business is intermediation must carry "Insurance" or "Assurance" in the name.
- Higher penalty threshold. The trigger for code of conduct action against a broker's principal officer or staff rises from Rs 1 crore to Rs 10 crore.
Feedback on this draft closed in the second week of July 2026, alongside four other IRDAI consultation papers covering the regulation-making framework, a revised penalty regime, foreign reinsurer capital and cybersecurity.
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Why Commission Reforms Became Necessary
IRDAI's latest annual report shows life insurers paid Rs 60,800 crore in commissions during 2024-25, an 18 per cent jump year on year. Premium in the same period grew under 7 per cent. Non-life insurers paid Rs 47,266 crore, and the regulator pulled up 23 insurers for breaching expense limits.
That is the core problem. The Expenses of Management framework introduced in 2023 replaced product-wise commission caps with an overall ceiling of roughly 30 to 35 per cent of gross written premium. Insurers were told to write a board-approved commission policy and stay inside the envelope.
Acko General Insurance chief executive Animesh Das has argued publicly that the envelope did not work. Insurers rebalanced portfolios and found other routes, he told Inc42, and commission levels never corrected.
The market has already seen what happens when a route closes. Turtlemint booked Rs 369.7 crore from "marketing fees" in FY23, about 88 per cent of its total revenue of Rs 419.9 crore. After IRDAI tightened commission regulations that year, restated revenue fell 81 per cent in FY24.
Meanwhile, penetration keeps slipping. Insurance penetration fell to 3.7 per cent of GDP in FY25, a third straight annual decline from the pandemic-era peak of 4.2 per cent. Density stands at about $97 per person against a global average of $943.
Proposed Distribution Reforms Expected Next
IRDAI chairman Ajay Seth has said the regulator is preparing a consultation paper on distribution reforms. Reports in early July placed a draft framework within four to six weeks.
Two ideas dominate the discussion.
- The first is staggering. Instead of paying a large share of the commission in year one, insurers would spread payouts across the life of the policy. That directly attacks churn, since an agent who gets paid over ten years has little reason to move a customer to a fresh policy in year three.
- The second is a hard cap per policy, paired with tighter EoM limits. Industry sources say the numbers discussed internally run into single digits. Nothing has been notified, and distributors are resisting.
PB Fintech chairman Yashish Dahiya has warned that commission caps would threaten the existence of distribution businesses, and has floated the idea of Policybazaar evaluating a manufacturing licence so it can underwrite directly.
What it means for agents
Individual agents feel the staggering proposal first. First-year income drops, renewal income rises, and the break-even point on a new client shifts out by years. Agents running on upfront cash flow will struggle. Agents with a large persistent book gain.
Policy-level tagging also ends anonymity. Every sale carries a name, which makes mis-selling traceable to a person rather than a branch.
Expect a smaller, more professional agent base. Das has flagged the risk that a sharp cap makes the profession less attractive and shrinks the workforce.
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What it means for insurers
Insurers get relief on one side and pressure on the other. Perpetual registration and fewer certification filings cut administrative work. But a per-policy cap removes the flexibility that made the EoM regime workable.
Product mix becomes the lever. Endowment and ULIP products carry far richer payouts than term cover, and a flat cap narrows that gap. Insurers with strong agency and direct channels sit more comfortably than those leaning on bancassurance economics.
The 23 insurers already flagged for expense breaches should assume closer scrutiny.
What it means for aggregators and insurtech platforms
This is where disclosure bites hardest. When a comparison page shows a "recommended" plan, buyers cannot see whether that ranking reflects suitability or payout. Publishing commission by insurer changes that conversation.
Ditto Insurance cofounder Shrehith Karkera has pointed out the practical gap: the draft does not define how commissions get reported, whether per insurer or broken down further. Until that is settled, the behavioural impact is hard to predict.
For Policybazaar, InsuranceDekho and Turtlemint, the strategic question is whether distribution alone remains a viable business. Manufacturing licences, service fee models and enterprise tie-ups all look more attractive under a capped regime.
What to watch
- The distribution reform consultation paper and whether it specifies a cap number.
- Whether staggering applies to new business only or to in-force books.
- How IRDAI defines commission reporting in the final intermediary regulations.
- Whether any distributor files for a manufacturing licence.
The direction is settled. More of each premium rupee is meant to reach claims, pricing and coverage. The bargaining is now about how fast, and who absorbs the cost of getting there.
