Insurance commissions to be cut by up to 50%; insurance to become cheaper for customers

The IRDAI has proposed changes to regulations governing the expenses and commissions of insurance companies. The proposal suggests reducing commission caps and overall expenses across various segments.

If you are planning to purchase life, health, or general insurance, this news is relevant to you. The Insurance Regulatory and Development Authority of India (IRDAI) has proposed new changes regarding commissions and company expenses within the insurance sector. The primary objective of this proposal is to regulate the commissions paid to agents and distributors and to enhance transparency in policy sales.

In a consultation paper released on September 23, 2026, the IRDAI proposed a phased reduction in the 'Expenses of Management' (EoM) limits for insurance companies. Additionally, it has proposed setting maximum commission caps based on specific insurance products and distribution channels.

What is the new proposal regarding commissions?

Under this new proposal, any payment made to a distributor—whether labeled as commission, reward, incentive, or by any other name—will be classified as commission. For general insurance companies, the proposal suggests reducing the current 30% cap to 25% over two years, with a further reduction to 20% over a five-year period.

The IRDAI has proposed reducing not only commissions but also the management expenses of insurance companies. For life insurance companies, the proposal aims to bring the EoM limit down to 15% within two years and to 12.5% ​​within five years.

Commissions to include all forms of payment

The new proposal stipulates that commissions will encompass not only direct commission payments but also other benefits received by distributors. Cash payments
Gifts and incentives
Brand or marketing-related support
Other financial benefits provided to distributors

What will be the impact on customers?

If this proposal is implemented, there could be greater control over the expenses and commissions of insurance companies and distributors. According to the IRDAI, a reduction in EoM could help lower the overall cost of insurance. This is expected to eventually impact policy prices and the benefits received by customers. However, the extent to which a policy premium will actually decrease is not yet determined.