Intermediary-led model keeps insurance costs elevated: Praxis Global

Praxis Global Alliance says high intermediary commissions keep general insurance expense ratios elevated, with renewal business continuing to remain acquisition-cost heavy

Intense competition to secure intermediary mindshare and wallet share keeps commission payouts structurally high, resulting in persistently elevated expense ratios across the general insurance industry, according to a Praxis Global Alliance report. 

In the intermediary-led model, there is a nearly 15–20 per cent differential between commissions for new and renewal business, but renewal economics continue to remain cost-heavy, with insurers incurring fresh commissions and acquisition-like expenses.

As a result, each renewal behaves similarly to a new acquisition, limiting the ability to benefit from prior customer acquisition. This prevents the accumulation of customer lifetime value at the insurer level, with limited carry-forward of economic gains across policy cycles. 

 

In contrast, while D2C acquisition costs may be higher upfront, the near-zero cost of renewals enables significantly stronger lifetime economics and value compounding over time. 

Within this, PSU insurers typically operate with lower commission intensity, driven by a higher mix of government schemes and group business with relatively lower distribution costs. In contrast, private insurers face higher commission outflows across key retail segments, reflecting greater reliance on intermediaries for growth. Standalone health insurers (SAHI) also exhibit high commission intensity, as continued dependence on intermediaries persists despite product specialisation, further reinforcing structurally higher cost bases.