The Insurance Regulatory and Development Authority of India (IRDAI) is set to introduce an effort-based commission framework that prioritises higher payouts for individual agents, followed by brokers, bancassurance, and other channels. According to reports from ET Now, this new framework aims to better align incentives with effort, customer value, and insurance penetration across the insurance distribution network. The initiative represents a fundamental shift from uniform commission structures, with effort-based remuneration expected to replace uniform commission structures across all insurance channels.
The effort-based commission model is expected to rank individual agents highest, followed by brokers, bancassurance channels, OEM insurance channels, and web aggregators. As reported by ET Now, individual agents are likely to receive 50% of total commissions, while corporate agents and banks are expected to receive 33%, and corporate agents in other sectors only 2%. Direct business is projected to account for 10.68% of commissions, with brokers receiving 3.72% and others accounting for 2%. The new commission rules provide private insurers with more flexibility in setting commission rates, as they can now offer commissions up to the overall Expenses of Management (EoM) limit, which is particularly beneficial for larger private players.
The proposed framework represents a significant shift from the current distribution structure. According to IRDAI FY25 Annual Report data cited by ET Now, individual agents currently receive 20% of commissions, corporate agents 9%, brokers 40%, direct business 22.5%, and others 7.61%. This indicates that the new framework would substantially increase individual agent compensation while reducing broker commissions. However, government-owned insurers may struggle due to higher existing management expenses, limiting their ability to increase commissions competitively compared to private players.
IRDAI is likely to release a consultation paper on effort-based commissions under the new distribution framework soon, as reported by ET Now. The initiative represents a fundamental shift in how insurance commissions are structured across different distribution channels, with the regulator aiming to create a more performance-driven compensation system that better reflects the value delivered to customers and the insurance sector's growth objectives. The framework is designed to enhance the availability, accessibility, and affordability of insurance products through the Bima Sugam proposal, which aims to create an online insurance marketplace that promotes transparency and efficiency in the insurance sector.
