IRDAI has proposed wide-ranging changes to insurance distribution, including simpler distributor structures, revised expense and commission frameworks, greater transparency and stronger safeguards against mis-selling. The proposals are open for stakeholder feedback until 25 October 2026.
The Insurance Regulatory and Development Authority of India (IRDAI) has released a consultation paper proposing major changes to the economics and structure of insurance distribution.
The proposed reforms aim to simplify the distribution system, improve cost efficiency and transparency, align incentives with policyholder value and expand access to insurance.
Simpler distribution structure
The consultation paper proposes three broad categories of distribution entities: Insurance Distribution Entities (IDEs), Insurance Distribution Persons (IDPs) and Market Infrastructure Institutions (MIIs).
The proposed framework would simplify registration and reduce entry and capital requirements. It would also give distributors greater flexibility to undertake insurance alongside other financial and non-financial activities.
The proposals are intended to encourage wider participation in insurance distribution, including in smaller markets.
Changes to insurance costs
IRDAI has proposed recalibrating the Expense of Management (EoM) framework through lower limits and a phased approach.
For life insurance companies, the EoM limit is proposed at 15% of Gross Direct Premium Income (GDPI) within two years, reducing further to 12.5% within five years.
For general insurance companies, the basis would shift from Gross Written Premium (GWP) to domestic GDPI. The limit would progressively reduce from 30% of GWP to 20% within five years.
The proposed changes are intended to improve cost efficiency and support better value for policyholders.
Revised commission and transparency framework
Commission limits would take into account the line of business, distribution channel, product complexity and the effort involved in selling and servicing a product.
The proposals also include greater disclosure of commission structures. Insurers and large distribution entities would be required to make commission policies more accessible.
The framework proposes stronger safeguards against mis-selling and compulsory bundling of insurance with other financial products. Customer needs and suitability would need to be documented, while commission claw-back could apply in cases of mis-selling.
The consultation paper also proposes greater use of digital infrastructure, including Bima Sugam and the Public Insurance Registry, to support comparison, portability, purchase and servicing of insurance.
How does it affect you?
You could get greater visibility into the costs and commissions associated with insurance products if this is adapted. Stronger suitability and mis-selling safeguards could also provide greater protection when buying insurance.
Greater use of digital infrastructure could make it easier to compare, purchase and service policies. However, these changes are proposals at this stage and may be modified before final regulations are issued.
Stakeholders can submit comments and feedback until 25 October 2026.
Source: Insurance Regulatory and Development Authority of India (IRDAI), Press Release dated 23 September 2026, Recalibrating Economics of Insurance Distribution.
