IRDAI plans to cap insurance commissions: what it could mean for your policy
IRDAI proposed caps on insurance commissions and a ban on forcing insurance with loans on 23 September 2026. Nothing changes yet. What it means for you.
IRDAI, the insurance regulator, released a consultation paper called "Recalibrating Economics of Insurance Distribution" on 23 September 2026, as reported by Asia Insurance Post and Legal 500. It proposes caps on the commissions that insurers pay to agents, banks, brokers and other sellers. Comments are due by 25 October 2026.
This is a proposal, not a rule. Nothing changes for your current policy yet. After it reads the comments, IRDAI plans to issue draft regulations for another round of public comments, as reported by Business Today.
Why IRDAI wants this
The paper says the average commission in general insurance rose from 8.5% to 17% of the premium between 2022-23 and 2024-25, as reported by ThePrint. It also says only 48% of life policies were still running 61 months after they were sold. High commissions can push sellers to sell policies people do not need. Business Today reported that someone who surrenders a life policy after the first year may get back only 31% to 64% of the premium paid, depending on the product.
What is proposed
- Commission caps by product, as reported by ThePrint and MediaNama. For a first-time individual health policy: 15% for banks and other large distributors, 20% for agents. For third-party motor cover on a new vehicle: nil for large distributors, 2.5% for agents. For the first year of a life policy: 5% to 20% for large distributors and 6.25% to 25% for agents, depending on how many years you pay premiums.
- Lower caps on renewals and on insurance sold with loans. Asia Insurance Post reports 5% to 10% on health renewals and porting, and 2% to 5% on insurance sold by banks and lenders with a loan.
- Every payment counts. Incentives, awards, gifts and other non-cash benefits to sellers would count towards the cap.
- Clawback for mis-selling. Commission could be taken back where mis-selling is proved.
- A name on every policy. Each policy would be linked to the person who sold it, and mis-selling records would be published through a proposed Public Insurance Registry.
- No sales targets for bank staff. Bank and NBFC employees could not get volume-linked rewards for selling insurance, as reported by Asia Insurance Post.
- Lower running costs for insurers. Life insurers would have to bring their management expenses down to 15% of the premium in two years and 12.5% in five years. For general insurers the limits would be 25% and 20%.
Insurance with a loan
Banks and NBFCs could not force you to buy insurance with a loan. If a policy lowers your loan rate, the lender would have to show you the rate with and without it. You could buy the cover from another insurer, and pay the premium separately instead of having it added to the loan, as reported by MediaNama.
Will premiums fall?
Part of every premium pays for commissions and the insurer's costs, and the paper aims to cut both. The reports we have seen do not say whether, or by how much, premiums would fall.
When it could start
Bloomberg reported, as carried by Business Today on 9 October 2026, that IRDAI is considering 1 January 2027 as the earliest start for the commission caps, with 1 April 2027 another possible date. The limits on insurers' expenses would tighten step by step over five years.
What you can do now
- If a lender asks you to buy a policy with a loan, ask for the loan terms without it and compare.
- Check the free-look period in any new policy document. You can return a policy you do not want within that period, subject to small deductions.
- If you were sold a policy you did not ask for, complain to the insurer first. If it does not resolve the complaint, go to IRDAI's Bima Bharosa portal or the Insurance Ombudsman.
Sources: Asia Insurance Post: IRDAI's distribution reforms, Legal 500: key proposals under IRDAI's consultation paper, ThePrint: IRDAI proposes lower costs and tighter commissions, MediaNama: IRDAI consultation paper on insurance distribution, Business Today (Bloomberg): IRDAI weighs January 2027 rollout of commission caps, Business Today: IRDAI's proposed mis-selling rules.
Rules, rates and limits change. Check the official source linked above before you rely on a figure here. Posts never contain referral or affiliate links from the writer.
Want to write for Saifu? Here is how.