Insurance brokers warn IRDAI commission cap could hurt policyholders and jobs

The Insurance Regulatory and Development Authority of India (IRDAI) has proposed fresh reforms in the insurance sector. Concerns have been raised that the changes could hit customers twice over.

IRDAI issued a consultation paper on September 23 titled "Reforms to reimagine the economics of insurance distribution". After it came out, shares of insurance-related companies fell sharply. The Insurance Brokers Association of India (IBAI) has now also voiced concern over the proposed reforms, warning that they could affect policyholders and employment.

IBAI represents 798 licensed insurance brokers in the country. It said it supports IRDAI's aims of improving policyholder protection, increasing transparency and curbing mis-selling of insurance. But it opposes the framework proposed to control the economics of insurance distribution. The association warned that a tight cap on commission would affect policyholders, jobs and the growth of the insurance sector.

The association's biggest worry is the proposed commission cap of over 30% for insurance products and distribution channels. At present, distributors earn more than 25% commission in the first year on selling life insurance, whereas under the new proposal this would fall to just 10%. According to IBAI, the proposals could harm customers who choose to hire a broker of their own so they can compare insurance products, negotiate on coverage and get help with claims. The association said insurance brokers are legally bound to act in the interest of customers, not insurers.

Citing figures, IBAI said 69% of complaints against general insurers relate to claims, while 63% of complaints registered on IRDAI's portal are resolved in favour of customers. The association said the new proposals reduce the role and commission of brokers engaged by customers, which could weaken policyholders' support at the time of a claim.

Beyond the impact on customers, IBAI also warned that jobs in the insurance distribution system could be affected, especially in small towns and villages. According to the association, of India's 27.18 lakh points of sale as of March 31, 2025, 14.81 lakh were run by insurance brokers. Many of them are self-employed and work in tier-2 and tier-3 areas.