The Insurance Regulatory and Development Authority of India (Irdai) is reportedly working on a comprehensive reform of the insurance distribution ecosystem that could fundamentally change how agents, brokers and other intermediaries are compensated. According to sources familiar with the discussions, the regulator plans to propose that commissions be paid throughout the tenure of an insurance policy instead of being disbursed largely upfront. Under the current framework, distributors can earn commissions of up to 40% of premiums on certain life and health insurance products, with a substantial portion paid at the time of sale. This proposed structure aims to incentivise long-term customer servicing, improve policy persistency and strengthen consumer trust in insurance products. The reforms are part of a broader push to transform India's insurance sector from a 'push-based' sales model to a 'pull-based' protection model, recognizing that as India marches towards developed nation status by 2047, a deeply penetrated, highly capitalized, and technologically agile insurance sector will be the bedrock of its macroeconomic stability.
The Insurance Regulatory and Development Authority of India's (Irdai) June 2026 consultation paper on a proposed Policyholders' Education and Protection Fund (PEPF) reveals a significant unclaimed benefits crisis in India. As reported by Insurance Business Asia, unclaimed maturity payouts, death claims, and surrender values exceeding ₹9,305 crore were held by Indian insurers at the start of fiscal year 2025. This crisis mirrors challenges faced globally, with South Korea's insurers carrying more than KRW10 trillion (approximately US$6.5 billion) in unclaimed benefits that policyholders have never collected. In 2025, about 800,000 cases worth KRW3.247 trillion were returned to consumers at an average of KRW4.04 million per case, yet only around 30% of the total unclaimed pool is recovered annually, a ratio that has changed little since campaigns began. The crisis underscores the urgent need for reforms that foster a culture of financial resilience and move beyond mere regulatory compliance to achieve sustainable growth in India's insurance sector.
Latest industry data reveals that life insurers paid ₹66,100 crore in commissions out of nearly ₹9.97 lakh crore in total premium collections during FY26, according to reports from The Economic Times. This translates to 6.6% of total premium income going to agents and other distributors. The commission structure varies significantly across insurers, with Acko Life leading at 33% commission ratio (₹62 crore on ₹188 crore premiums), followed by CreditAccess Life at 29.4% (₹184 crore on ₹626 crore), and GoDigit Life at 26.8% (₹402 crore on ₹1,500 crore). Bandhan Life paid commissions equivalent to 23.7% of its premium income, while Tata AIA Life completed the top five with a 14% commission ratio (₹5,358 crore on ₹38,164 crore).
The Insurance Regulatory and Development Authority of India (Irdai) has for the first time sought detailed operating expense data excluding commissions from life insurers, according to reports from The Economic Times. This represents a significant shift from the regulator's previous approach of primarily tracking insurers' overall Expenses of Management (EOM), which combines commissions and operating expenses within a single regulatory limit. The move comes ahead of Irdai's proposed consultation paper on distribution reforms, expected by the end of July, which is unlikely to prescribe commission rates but will lay down broad principles governing the distribution architecture. The regulatory focus on expense transparency reflects the sector's growing importance as a pillar of sovereign fiscal stability, with life insurers holding nearly 25% of outstanding Central Government dated securities.
Industry executives have welcomed the proposed reforms, with Arun Ramamurthy of Staywell.Health stating that staggered commissions would shift the focus from one-time sales to long-term customer relationships. According to Ramamurthy, linking intermediary compensation with the long-term performance and continuity of policies should reduce mis-selling and improve the quality of advice provided to customers. The transition is expected to be digital-led, with digital solutions playing a crucial role in education, simplification, disclosures and servicing to help customers make informed decisions. As Irdai Chairman Ajay Seth noted, the reforms indicate a larger change in the insurance landscape, emphasizing that trust plays an important role in the insurance ecosystem as insurance penetration increases. The sector's macroeconomic importance is further highlighted by its role in providing financial protection and mobilising long-term capital for sovereign financing, with India's overall insurance penetration standing at 3.7% in FY25, comprising 2.7% life and 1% non-life insurance.
