IRDAI Pushes Consensus on Commission Reforms

Int’l Insurance Desk: IRDAI chairman Ajay Seth has once again trained a critical eye on the practices of digital insurance platforms and the high commissions that dominate distribution economics. Speaking at the Business Standard BFSI Insight Summit in Mumbai, he made clear that the regulator remains focused on protecting policyholders while reshaping how insurance is sold and remunerated.

Seth ruled out any form of dynamic pricing on digital platforms, drawing a sharp distinction with other industries. Dynamic pricing works in the airline industry, not in insurance, he said. The basic principle of any digital platform should allow customers to come and compare prices without sharing personal details. There should be no opportunity for dynamic pricing. He specifically questioned the common practice of platforms asking for mobile numbers before displaying premiums and then contacting users, sometimes seeking exemptions from Do Not Disturb rules to push sales.

Online aggregators play an important role in helping customers compare products, Seth acknowledged. Yet he stressed that their focus must remain firmly on the policyholder. They should deliver a good product that people understand at the lowest possible price, rather than diversifying into physical distribution channels or other business models that shift attention away from the customer’s interest.

On commissions, the chairman highlighted how elevated payouts erode value for policyholders. In health insurance, average commissions across new and renewal business currently stand around 24 percent. The regulator’s consultation paper proposes bringing these down to the 15 to 20 percent range, with higher payments for first time sales that require greater effort and lower ones for renewals. If such a large share of the premium goes toward acquiring business, he explained, little remains in the risk pool after administrative costs. That inevitably creates upward pressure on premiums themselves.

The consultation paper, released on 23 September, also addresses broader distribution economics and expenses of management. Feedback deadlines were extended to 31 October after more than 650 submissions poured in, reflecting the intensity of industry interest and concern. Seth emphasised that reforms of this nature must rest on consensus. The regulator has no intention of disrupting market segments or individual livelihoods and will move forward only after careful examination of the evidence and stakeholder views, with a target implementation window in early 2027.

These comments reinforce IRDAI’s ongoing scrutiny of digital sales practices and commission structures. The aim is clearer incentives that reward persistency and genuine customer value rather than short term acquisition. Whether the final rules succeed in lowering costs and improving outcomes for policyholders will depend on how effectively the industry and regulator can align on the path ahead, as reported by The Economic Times and The Telegraph India.