IRDAI’s Reform Push That Can Upend Insurance Startups

IRDAI has proposed mandatory commission disclosures for insurance intermediaries and policy-level accountability measures, signalling the first step in a broader overhaul of insurance distribution regulations

The move comes amid concerns over high distribution costs, with commissions in some cases accounting for 40%-60% of insurance premiums and industry-wide commission payouts continuing to outpace premium growth

While the current draft focuses on transparency, industry executives expect tougher reforms ahead, including potential commission caps that could fundamentally alter the business models of insurers, distributors and insurtech platforms

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When someone buys car insurance in India, it’s generally assumed that most of the premium goes towards insurance coverage. However, this is often not the case. 

On a ₹50,000 motor insurance premium for a new car, an insurer may pay ₹20,000 to ₹30,000 to the dealer or intermediary that sold the policy. That amounts to 40% to 60% of the premium paid by the consumer. 

“The true price of the product may be ₹20,000-₹30,000,” an industry source told Inc42. “But the customer ends up paying almost double because of the commission component.”

To address this, the Insurance Regulatory and Development Authority of India (IRDAI) has come out with a consultation paper. The regulator has proposed that insurance intermediaries earning more than ₹10 Cr in commissions annually publicly disclose those earnings on their websites. IRDAI has also proposed that every policy be tagged to the individual responsible for the sale as part of efforts to strengthen consumer protection. 

It is pertinent to mention that life insurers paid out ₹60,800 Cr in commissions in FY25, a jump of 18% YoY, while overall premium growth was a far more modest 6.7%. Meanwhile, commission expenses in the non-life insurance segment hit........

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