Commission expense ratio of life insurers rises to 6.86% in FY25
Life insurers saw commission costs rise in FY25, driven by higher payouts by private players, even as LIC cut agent commissions and insurance penetration slipped
 "Commission expense ratio of life insurers rises to 6.86% in FY25")
The commission expense ratio in the life insurance industry, measured as a percentage of total commission to total premium, rose to 6.86 per cent in the financial year 2024–25 (FY25) from 6.21 per cent in FY24 owing to an increase in the commission expense ratio among private life insurers, according to the Handbook of Indian Insurance Statistics.
The commission expense ratio of private life insurers rose to 8.94 per cent in FY25 from 7.22 per cent in FY24. For the state-owned Life Insurance Corporation of India (LIC), however, it dropped to 5.18 per cent from 5.46 per cent.
In FY25, the insurance industry saw changes in its distribution structure following revisions in surrender value norms. Insurance companies employed multiple levers to mitigate the impact on their margins, including changing distribution payouts by reducing commissions to distributors, deferring incentive bonuses, or offering higher persistency bonuses.
LIC had reduced its first-year agent commission from 35 per cent to 28 per cent, while increasing its trail commission to 7.5 per cent from 5 per cent. Private insurers, meanwhile, offered better commissions to distributors with higher ticket sizes and better retention rates last year.
During the year, commissions paid on unit-linked insurance plans (ULIPs) and traditional products rose 18 per cent year on year to Rs 60,799.91 crore in FY25. Of this, private life insurers’ commissions rose 38.8 per cent year on year to Rs 35,491.15 crore, while LIC’s commissions slipped 2.5 per cent year on year to Rs 25,308.76 crore.
In FY25, the premium collected by life insurers rose 6.73 per cent year on year to Rs 8.85 trillion. Of this, private life insurance premiums rose 12.07 per cent to Rs 3.96 trillion, while LIC posted 2.75 per cent year on year growth in premiums to Rs 4.89 trillion. However, life insurance penetration in the country in FY25 slipped to 2.7 per cent from 2.8 per cent in FY24. Commission expense Ratio
| Year | Life Insurance industry (%) | Private life insurers (%) | Life Insurance Corporation of India (LIC) (%) |
| 2016 | 4.84 | 4.04 | 5.16 |
| 2017 | 5.29 | 4.65 | 5.53 |
| 2018 | 5.01 | 4.18 | 5.41 |
| 2019 | 5.47 | 4.94 | 5.73 |
| 2020 | 5.38 | 5.07 | 5.54 |
| 2021 | 5.25 | 4.80 | 5.50 |
| 2022 | 5.18 | 4.81 | 5.41 |
| 2023 | 5.41 | 5.44 | 5.39 |
| 2024 | 6.21 | 7.22 | 5.46 |
| 2025 | 6.86 | 8.94 | 5.18 |