IRDAI Commission Rules 2026: Seth Promises Orderly Transition

The IRDAI commission rules 2026 will not be forced through overnight. That was the message from Ajay Seth, chairman of the Insurance Regulatory and Development Authority of India (IRDAI), on 15 October, as insurers, banks and brokers pushed back against draft limits on distribution commissions and insurer expenses. The proposals are still out for consultation until 25 October, and the regulator has floated 1 January or 1 April 2027 as possible start dates.

Editorial note: The proposals described here come from IRDAI's own press release and consultation paper, both linked in the sources below. Proposed figures were cross-checked against independent summaries by ICRA, MediaNama, Mondaq and Coverfox. Seth's remarks are taken from Reuters reporting, and industry positions from the Insurance Brokers Association of India as reported by Business Today and Insurance Business. Analysis is The InsurTech Voice's own.

What Did IRDAI Chairman Ajay Seth Say?

Speaking to reporters in Mumbai, Seth described the goal as a gradual, well-managed shift from today's system to an improved one, adding that the regulator has no wish to unsettle any insurer, distributor or individual.

He had met insurers and distributors that week. According to Seth, their requests centred on three things: relief for smaller players, relief for low-value policies, and a defined path from the old rules to the new ones. He signalled openness to a transition period but made clear it would be limited, so that reform could not be postponed indefinitely.

On timing, brokers had asked for the comment deadline to be pushed back to late December. Seth gave no such undertaking and asked stakeholders to keep to the current deadline.

What Is in the IRDAI Distribution Framework Proposal?

On 23 September 2026, IRDAI set out its plans in a press release backed by a detailed paper, Recalibrating Economics of Insurance Distribution. The paper comes in two parts: the first sets out what the regulator wants to change, and the second presents the data behind its case.

The headline change to IRDAI's insurance commission rules is a return to hard limits. Under India's insurance commission regulations since April 2023, insurers have been free to set commissions as long as total spending stayed within an overall expenses cap. The draft would replace that flexibility with separate caps tied to the line of business, the sales channel, product complexity and the effort involved in selling and servicing a policy. It would also:

• count all forms of distributor reward as commission, closing routes for payments outside the caps
• reorganise intermediaries into three broad groups: distribution entities, distribution persons and market infrastructure institutions
• strengthen mis-selling safeguards and commission disclosure, including clawing back commission where mis-selling is proven
• stop banks and NBFCs from making insurance a compulsory condition of a loan or other product
• pay higher incentives for policies sold beyond the major cities

Proposed IRDAI commission caps: selected examples

All figures are draft numbers that could be revised before the regulations are finalised.

How Would IRDAI Expenses of Management Limits Change?

Insurers' total cost allowance, the expenses of management (EoM) limit, would also come down in stages across five years.

For general insurers, the change is both a lower percentage and a narrower base, since the final limit applies to domestic premium only.

Why Is IRDAI Reviewing Insurance Commissions?

IRDAI's case is that distribution costs have grown faster than premiums since commission limits were removed in 2023, without a matching rise in insurance penetration. Its evidence shows sharp differences between channels. Bank corporate agents earned roughly 27% of first-year premium on life policies on average, while other corporate agents took around 61%.

The paper also tracks how quickly payouts outran business between FY2022-23 and FY2024-25. In a sample of life insurance sold through corporate agents, new business premium rose by about 28% while distributor remuneration climbed by about 125%. Motor showed an even wider gap: premium up about 34%, commission up about 259%.

The regulator argues that pay is being driven by insurers competing for access to distribution partners rather than by the work distributors actually do. In the regulator's view, cheaper distribution would let more people buy general insurance and leave life policyholders with better returns on savings products. The reforms also form part of a wider overhaul of the sector that follows its opening to full foreign ownership.

What Are Brokers and Distributors Concerned About?

The Insurance Brokers Association of India (IBAI) speaks for 798 licensed brokers; between them, they handle about two-fifths of the country's general insurance premium. It has raised several objections:

• Scale of change. The paper proposes more than 30 separate caps alongside a reduction of roughly a third in the total amount insurers may spend on expenses.
• Jobs. IBAI warns that up to 10 lakh jobs could be at risk. Of the 27.18 lakh point-of-sale persons in India at the end of March 2025, 14.81 lakh were sponsored by brokers, according to IBAI.
• Channel fairness. Channels that work with many insurers, including banks, brokers and online platforms, would generally face lower caps than tied agents, which IBAI sees as an uneven approach to insurance distributor remuneration.
• Unintended effects. IBAI argues that rigid caps could push payments into less transparent forms, as it says happened before 2023, and that mass commission disclosure could encourage illegal rebating.

Its preferred route is to keep the 2023 framework and tackle mis-selling directly rather than impose caps across the board. These are projections by the association rather than established facts. IRDAI whole-time member (distribution) Girija Subramanian has rejected the job-loss warnings, arguing that wider distribution could create work rather than remove it.

Investors reacted quickly. Shares of listed insurance distribution businesses, including Policybazaar owner PB Fintech, fell sharply in the days after the paper was published.

What Could Change for Insurers, Banks and Distributors? (Our Analysis)

Insurers face two adjustments at once: lower commission caps and a shrinking expense envelope. Even before the rules are final, finance and distribution teams should model their current payouts against the draft caps, identify contracts that would breach them, and plan how renegotiation would work across agents, brokers and corporate partners.

Banks and NBFCs in bancassurance have the most to recalculate. Credit-life cover sold alongside loans faces some of the steepest proposed cuts, lenders would no longer be allowed to make insurance compulsory, and analysts have noted that insurance commission makes up a meaningful share of profit at some lenders. Remuneration arrangements with partner insurers will need to be reworked if the caps survive consultation.

Brokers and InsurTech platforms will need to show value beyond the sale, through advice, claims support and service, to justify their economics under tighter limits. Trust-led models are one answer; our founder story on how Beshak built an insurance distribution model around customer trust shows how one broker-founder rethought the economics of advice. Technology is another: former Paytm insurance broking head Pranshu Diwan explains in our founder story why AI's biggest wins in insurance are in distribution and claims, including cutting the cost of serving customers.

Investors, meanwhile, are still paying a premium for insurance technology that lowers operating costs. In the US, a GTCR-led group has agreed a $6.1 billion buyout of claims software provider CCC Intelligent Solutions, a sign that efficiency tools hold their value even as distribution margins come under pressure. Regulators elsewhere are also nudging the market towards innovation; Saudi Arabia's Insurance Authority, for example, is backing new solutions through its SAR 560,000 InsurTech hackathon.

For a product-by-product walkthrough of the draft caps, see Insurnest's guide to the proposed commission limits.

IRDAI Commission Rules 2026: Key Dates

What Happens Next?

Comments can be filed through IRDAI's consultation portal until 25 October. Once the window closes, IRDAI will review the submissions before drafting final regulations. The outcome will shape insurance distribution reforms in India for years to come. The key questions for the industry are how far the caps move from the draft, whether smaller market participants or low-value policies receive any relief, and how long any transition window lasts. Until the final text is published, the commercial impact on any individual insurer or distributor cannot be measured with confidence.

India is not the only market where regulators are redrawing the rules this autumn. In the Gulf, Bahrain is introducing mandatory health insurance for expatriate residents from 31 October, linking cover to work and residence permits.

This article provides news and analysis for insurance professionals. It is not legal, regulatory or investment advice. Readers should rely on IRDAI's official publications and seek professional advice before acting.

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