The Insurance Regulatory and Development Authority of India (IRDAI)'s proposed distribution reforms will require careful calibration of commission limits to avoid slowing the expansion of insurance coverage, particularly among first-time customers, according to a report released on Friday, 30 October 2026. The findings, from Redseer Strategy Consultants, come as the regulator's consultation window for the proposals closes on 31 October.

Why Commission Calibration Matters

Insurance remains largely a 'push product' in India, with roughly 95 per cent of retail premiums sold through assisted channels — agents, brokers, and corporate intermediaries. Insurance penetration stood at 3.7 per cent of GDP in FY25, approximately half the global average, while premium growth has been driven predominantly by renewals from existing customers rather than new entrants into the market.

The Redseer report warns that commission limits set below the cost of reaching and serving first-time, lower-ticket customers — who are among the most expensive to acquire — could materially slow the pace of coverage expansion needed to achieve the 'Insurance for All by 2047' goal.

What IRDAI Has Proposed

IRDAI released a consultation paper proposing reforms to insurance distribution economics, citing distributor remuneration growth that outpaced premium growth by four to five times between FY23 and FY25, even as overall coverage remained broadly unchanged. The proposals would lower insurers' expense limits to 12.5 per cent of premium in life insurance and 20 per cent in general insurance by FY2032. They also introduce all-inclusive commission caps by product and channel, with lower caps for distribution entities compared to tied agents, and nil or nominal commission on mandatory and loan-linked cover.

The Problem With Loan-Linked and NBFC Channels

The report broadly accepts the direction of the proposed reforms, noting that evidence of high remuneration for limited selling effort is strongest in loan-linked channels. Average payouts to NBFC corporate agents in life insurance surged from approximately 7 per cent to 42 per cent of new business premium between FY23 and FY25 — a stark indicator of commission inflation decoupled from genuine distribution effort.

However, the same commission limits would also apply to intermediaries that independently acquire and service customers. The report cautions that how these limits are calibrated for such channels will directly shape the pace of coverage growth the 2047 target demands.

What the Experts Recommend

Chhavi Singh, Associate Partner at Redseer Strategy Consultants, said the 'Insurance for All by 2047' target will require adding insured lives at about three times the recent pace, largely among first-time customers who depend on assisted distribution channels.

'As the Authority finalises the framework, comparing channels on their total cost of acquisition, supporting verified first-time buyers wherever they live, aligning renewal limits with servicing needs and phasing in the commission caps alongside the expense glide path could help the reforms deliver both efficiency and wider coverage,' Singh said.

What Happens Next

With the feedback window closing on 31 October, IRDAI is expected to review stakeholder inputs before finalising the framework. The outcome will have significant implications for how quickly India can close its substantial insurance penetration gap — and whether the efficiency gains from curbing excess commissions come at the cost of slowing coverage growth among those who need it most.