Growing commission payouts across India’s insurance sector are pushing the regulator IRDAI closer to a possible policy reset in 2026. With commission expenses rising far faster than premium growth in both life and non life insurance, industry leaders say IRDAI is increasingly concerned about long term sustainability and pricing discipline.
According to a senior life insurance executive aware of policy discussions, commissions have become the most immediate regulatory pressure point for IRDAI. “The only thing that I expect on the regulatory side is on commission. Something significant is going to happen,” the executive said. IRDAI is evaluating multiple options, including tighter commission caps and expense based limits similar to frameworks used in other financial sectors. “Broadly speaking, we are looking at some significant restructuring, though there is not a whole degree of clarity yet.” IRDAI data for FY25 shows life insurance commissions crossed Rs 60800 crore, rising 18% year on year, while premium growth remained in single digits. First year commissions rose over 20% and single premium payouts surged nearly 37%.
Industry executives argue that IRDAI must account for how insurance distribution has evolved. “Distribution today extends well beyond policy acquisition to include ongoing servicing, compliance, technology integration, customer support and claims assistance,” said Sanjiv Bajaj of Bajaj Capital Ltd. He said commission moderation should come through structural improvements rather than abrupt IRDAI intervention, with incentives linked to policy continuity, service quality and customer experience. “A differentiated, technology enabled approach will help keep insurance affordable while maintaining a sustainable and resilient ecosystem,” he added.
Others highlight structural flaws in incentive design that IRDAI may seek to address. “Acquiring new customers has become more expensive due to intense competition, a higher share of single premium and bancassurance business and commission structures that remain heavily front loaded,” said Rakesh Kumar of Square Insurance. In non life insurance, IRDAI data shows commissions rose above Rs 47000 crore in FY25, driven mainly by motor and health insurance. Experts warn that sharp IRDAI caps could distort pricing and loss ratios. “Rising commission expenses are rightly under regulatory review, but any rationalisation needs careful calibration,” said Tejas Jain of BimaKavach. With commission payouts now outpacing premiums, market participants expect IRDAI to adopt a phased and consultative approach that curbs excesses without disrupting insurance distribution.
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