Proposed Commission Caps in India Raise Concerns of 60–70% Income Drop for Insurance Brokers
After India's insurance regulator **IRDAI** issued a proposal to reduce commissions and distribution costs, insurance brokers have warned that incomes could fall by **60–70%** and that the livelihoods of at least **1 million** people could be at risk over the next 5 years. More than 650 suggestions were received on the proposal, and the deadline has been extended to **October 31**, though the new rules have not yet been finalized.
Kathmandu. Concerns are being raised that proposed commission caps in India will reduce the income of insurance brokers.
The Insurance Brokers Association of India has stated that if the proposed commission caps are implemented, insurance brokers' income will fall by 60–70%. The association has also warned that this could put the livelihoods of at least 1 million people at risk over the next 5 years.
On September 23, India's insurance regulator IRDAI issued a proposal to reduce commissions and insurance distribution costs. After receiving more than 650 suggestions, the deadline was extended from October 25 to October 31. The new rules have not yet been finalized. Insurance brokers help customers choose and purchase insurance from various companies. In return, they receive commissions from insurance companies.
In 2023, India removed commission caps on various insurance products. Instead, a cap was placed on companies' total operating expenses. This was intended to give companies more flexibility in expenses. However, according to the regulator, the increase in commissions did not lead to the expected growth in customer benefits and insurance coverage.
According to the insurance regulator, between fiscal years 2022/23 and 2024/25, premium from new policies (which is a major part of corporate life insurance agents' income) increased by 28%, while payments including commissions increased by 125%. Corporate agents are banks or other institutions that sell policies on behalf of insurance companies.
During the same period, premium collected through brokers in non-life insurance increased by 37%, but commissions increased by 173%. In this segment, the average commission for brokers also rose from 8.5% to 17%.
According to the regulator, this increase in commissions was due to the bargaining power of large distributors and additional incentives. Under the new proposal, first-year commissions for certain types of life insurance policies will be capped at 5–20% for sales entities such as brokers and 6.25–25% for direct agents. This rate will depend on the type of insurance and the premium payment term (the number of years premiums are paid).
For new individual health insurance policies, commissions for sales agencies such as brokers will be a maximum of 15%, and 5% on policy renewals. Similarly, for direct agents, commissions are proposed at 20% and 10%, respectively. –Agency