IRDAI to Cap Insurance Commissions; Draft Norms Expected in 4 Months Amid High Payouts

• IRDAI is developing a framework to cap commissions for insurance agents, brokers, and digital intermediaries, following recent amendments to the Insurance Act.
• Draft regulations are anticipated within four months, with a phased implementation over 6-12 months across life, health, and general insurance sectors.
• The move addresses concerns over surging commission payouts, which reached Rs 60,800 crore for life insurers in FY25 (6.9% of premiums), significantly outpacing premium growth.
• The Reserve Bank of India (RBI) flagged high commissions for weakening underwriting, increasing expense ratios, and posing conduct risks, especially in segments like motor insurance (25-57% payouts).
• New amendments to the Insurance Act grant IRDAI enhanced authority to specify commission ceilings and remuneration structures, moving beyond broad expense limits.

Why It Matters: IRDAI is set to cap insurance commissions, aiming for a uniform regime to curb high payouts and enhance consumer protection.