India’s insurance regulator has proposed bringing commission caps back into a market that has operated under a more flexible system since 2023.
The discussion paper issued late Wednesday would differentiate between relatively simple policies and products that require more advice. Banks and brokers serving several insurers would generally face lower ceilings than tied agents, while rural and small-town sales could attract additional compensation.
For life insurance, the suggested first-year commission range for banks and brokers is 5% to 20%, well below the rates attached to some products now. Health-insurance commissions would be capped at 15% in the first year and 5% on renewal. The paper would also eliminate commission on compulsory third-party motor cover for new vehicles and limit payments on renewals.
One provision reaches beyond the size of the fee. Banks would be barred from making a loan conditional on buying an insurance policy. If a loan is offered at a lower rate with insurance, the lender would have to show both rates and permit the borrower to obtain cover elsewhere.
The Insurance Regulatory and Development Authority of India presents the changes as a way to reduce mis-selling and contain distribution costs. Whether customers would receive lower premiums is less certain; a cap limits what may be paid to intermediaries but does not automatically require every saving to be passed on.
The proposal is not yet binding. Public feedback is open until October 25, and the regulator may revise the structure before adopting final rules. Insurers and bank-led distribution networks now have a defined opportunity to contest the numbers and the assumptions behind them.
