Insights
IRDAI’s proposed reforms: Why brokers need to respond now
IRDAI’s proposed insurance distribution reforms could affect the income available to brokers to maintain trained staff, advise customers, service policies and assist with claims.
The consultation paper, “Recalibrating Economics of Insurance Distribution,” proposes changes to commissions and who can distribute insurance. It raises an important question: will independent brokers be able to continue providing the support their customers need?
These are consultation proposals, not final regulations. Brokers have an opportunity to explain their concerns and recommend changes. Please watch the video below as part of the wider discussion, and read the original consultation papers attached to this article.
Read the original consultation:
What is being proposed?
The proposals include:
- Bringing brokers, corporate agents, web aggregators and several other channels under a common Insurance Distribution Entity (IDE) framework.
- Reducing initial capital requirements for IDEs to ₹10 lakh, with additional financial requirements linked to business income.
- Allowing insurance distributors to undertake non-insurance businesses, subject to applicable requirements.
- Expanding access to multiple insurers and products, subject to the required knowledge and skills.
- Introducing product-wise commission ceilings, with several limits for distribution entities lower than those for insurer-appointed agents and associates.
| Insurance | Distribution entities (including brokers) | Agents and associates |
|---|---|---|
| Individual health: first-time business | 15% | 20% |
| Individual health: renewal / porting | 5% | 10% |
| New-vehicle motor third-party | Nil | 2.5% |
These are maximum limits, not guaranteed payments.
Why should brokers be concerned?
A broker’s work continues long after a policy is issued. Understanding risks, comparing coverage, explaining exclusions, arranging endorsements, supporting renewals and assisting with claims all require trained people and ongoing expenditure.
The important question is whether the proposed remuneration adequately supports these responsibilities.
The paper proposes lower commission ceilings for distributors that can offer policies from multiple insurers, and relatively higher ceilings for those restricted to an insurer’s products.
Should a distributor offering customers a wider choice receive a lower ceiling than one restricted to an insurer’s products?
Access to multiple insurers helps brokers compare cover and recommend suitable policies. Rules should address commission conflicts while protecting the value of independent advice.
Large businesses with existing customer networks and income from other activities may be able to absorb low insurance margins more easily than firms that depend on insurance advice and service.
If independent firms cannot cover their costs, customers could lose access to personal advice and claims support.
Reform is necessary—but it must preserve advice and service
Part 2 raises concerns about high payouts, payments between connected businesses and sales influenced by commissions. Brokers should support transparency and action against mis-selling.
Reforms should also recognise the cost of responsible advice and continuing service, and ensure lower distribution costs deliver measurable benefits to customers.
The larger risk we should not ignore
Lower prices and more sellers may initially appear to increase competition. But if independent firms cannot survive on the available margins, business could eventually become concentrated among fewer, financially stronger firms.
Low prices today do not, by themselves, guarantee customer choice tomorrow.
This possible outcome should be assessed before the rules are finalised. The concern is whether the framework could unintentionally favour financial strength over independent advice.
What should brokers ask for?
Our submissions should seek:
- Commission limits that recognise advice, servicing and claims-support costs.
- Fair treatment of independent advice: explain why offering a choice of insurers should attract lower commission ceilings.
- The same knowledge, customer-needs assessment and accountability requirements for everyone selling insurance.
- Transparent payments between connected businesses, and safeguards against using other business income to unfairly exclude independent firms.
- Digital marketplaces that compare policies fairly, disclose paid promotions and protect customer data.
- Time to adapt, with checks on whether the changes weaken customer service or concentrate business among fewer firms.
Please watch the video
Please watch the video below as part of the wider discussion. Consider what these proposals could mean for your firm and the customers who rely on your advice and claims support.
Use the original papers above to check the proposals and prepare your own response.
Put the impact on your firm on record
Start with your main product categories. Compare your actual commission income with the proposed ceilings, separating first-time business, renewals and porting. Explain what that income supports—from advice and policy servicing to claims assistance. Share your findings with your association and submit specific recommendations. The paper specifies 25 October 2026 as the feedback deadline.
Feedback can be submitted through the consultation portal. The paper also provides an email route using the prescribed Excel template at drfeedback@iib.gov.in.
Affordable insurance should come with meaningful choice and dependable support. Brokers need to explain what it takes to provide both.