Proposed insurance distributions norms: IRDAI Chief says ‘I am in the listening mode’

“I am in the listening mode, hearing the concerns that are coming in,” said IRDAI Chief Ajay Seth on the insurance regulator’s public consultation paper on insurance distribution even as he emphasised that a reform of this nature has to be built on a consensus.

The Insurance Regulatory and Development Authority of India’s September 23, 2026, consultation paper proposes the deepest overhaul of insurance distribution since the 2016 expense rules: hard, all-inclusive commission caps by product and channel; expense ceilings that tighten over five years from FY28; and one three-tier licensing framework for every intermediary, according to CareEdge Ratings.

Deadline extended

IRDAI has extended the deadline to submit feedback on its proposed distribution reforms to October 31, 2026, from the earlier October 25, 2026. In a letter sent to Prime Minister Narendra Modi on October 2, the Insurance Brokers’ Association of India cautioned that the implementation of the proposed reforms would result in the loss of jobs, growth and reduced competition in the industry.

“With this consultation paper (on insurance distribution), perhaps some progress has been made in generating discussion of where the sector’s transformative role and the changes are required.

But yes, I am in the listening mode, hearing the concerns that are coming in,” he added.

“Now is the stage of building a consensus. In the last about 40 days, I have met extensively people from the insurance sector, from the distribution sector, people who represent the policyholders, and so on,” Seth said.

Pressure on premium rate

Citing the example of the average commission in the health insurance sector being about 24 per cent, including new and renewal policies, the IRDAI Chief said, “Now if the 24 per cent goes towards acquiring the business, thereafter the cost of administration, what is left in the risk pool is small.

“Obviously, then it will lead to upward pressure on the premium rate.

So, I would put it here that from an average of about 24 per cent bring it down to maybe 20 per cent or 15 to 20 per cent.”

Seth emphasised that if India is growing at 8 per cent, the insurance sector needs to grow one-and-a-half times to two times for the next 10 to 15 years. That indicates a large unmet demand.

He emphasised the importance of transparency, which leads to customer trust, in terms of the kinds of products that are available. Today, there are too many products in the market.

The life insurance industry has close to 1,500 products. Health insurance has close to 1,000 products.

Seth noted that how much effective cover a policyholder is getting plus what kind of a return on the savings he/she is getting is not well known in an easy-to-understand form.

Referring to the digital journey, the IRDAI Chief observed that while the role of intermediaries will continue to be important, a large part of the public will be comfortable in making the digital journey.

For this, the insurance sector needs to only look at the efficiencies and user experience that the banking sector and the capital markets have brought in. So, the best practices in the banking sector and the capital markets can be adopted in the insurance sector.