Insurance Brokers Oppose IRDAI’s Commission Cuts Over Job Loss Fears

The Insurance Regulatory and Development Authority of India (IRDAI) has recently proposed significant changes to the commission structure in the insurance sector, sparking strong opposition from insurance brokers. The reforms aim to adjust commission payouts based on distribution channels, product categories, and customer life cycles under an all-cost-inclusive framework. However, brokers argue that these changes could severely impact their revenues and lead to widespread job losses.

The Insurance Brokers Association of India (IBAI) has voiced concerns that the proposed commission caps will reduce earnings for brokers and potentially jeopardize the livelihoods of nearly one million individuals employed in insurance distribution. The association has requested an extension for submitting feedback on the proposal, originally due by October 25, asking instead for a deadline at the end of December to allow for more thorough consultation.

IBAI described the proposed commission structure as unprecedented and untested, emphasizing that such a fundamental overhaul requires more discussion before implementation. They warned that the plan includes setting over 30 different commission caps across various products and channels, alongside a reduction of insurers’ overall expense limits by approximately one third. According to the brokers, this approach could harm policyholders rather than help them.

The association’s letter to the Prime Minister’s Office highlighted that the cost savings envisioned by the regulator would largely shift from distributors and insurer employees to insurance company owners. There is no guarantee that these savings would be passed down to customers in the form of lower premiums or better services.

IRDAI’s consultation paper released in September 2026 points to a rapid increase in commission expenses outpacing premium income and other operating costs as a reason for the reforms. The regulator seeks to align commission payouts more closely with the actual costs of distributing insurance products, aiming for a more balanced expense structure across the industry.

At the core of the new proposal is a revised Expense of Management (EoM) framework. EoM reflects the share of an insurance policy’s price allocated to administrative and operating costs. Lower EoM values are generally favorable for policyholders since they may lead to more efficient pricing. IRDAI intends to gradually reduce the overall expenses borne by insurers, marking a shift from the existing 2023 framework.

IBAI, however, recommends maintaining the 2023 methodology for calculating EoM with minor adjustments to tighten computation rules, cautioning against drastic changes that might destabilize the sector. The brokers also suggested that insurers should be required to refund premiums or lower renewal costs if claim ratios fall below a certain threshold, such as 65 percent, or if policies are mis-sold. They pointed to existing mechanisms under government schemes like the Pradhan Mantri Fasal Bima Yojana (PMFBY) and Ayushman Bharat as examples where such safeguards are already in place.

The debate over these reforms reflects broader challenges in the Indian insurance market, which has experienced rapid growth alongside increasing complexity in distribution. Balancing cost efficiency with fair compensation for brokers and ensuring policyholder benefits is a delicate task. The outcome of this consultation will have lasting effects on how insurance products are sold and priced in India.

As the deadline for feedback approaches, industry stakeholders are closely watching how IRDAI will address the concerns raised by brokers. The regulator’s final decision will shape the future of insurance distribution economics and impact millions of employees and customers across the country.