Irdai distribution overhaul could hit brokers' revenue by 70%: IBAI

Insurance brokers have sought a deeper assessment of Irdai's proposed distribution reforms, warning of a 60-70 per cent revenue impact and around 1 million jobs at risk

The Insurance Brokers Association of India (IBAI) on Tuesday sought a deeper assessment of the Insurance Regulatory and Development Authority of India’s (Irdai’s) proposed overhaul of insurance distribution norms, with the broking industry estimating a 60-70 per cent impact on revenues and around 1 million jobs at risk. The association has also sought an extension of the deadline for submitting feedback on the proposals until the end of December.

 

The broking industry has sought an assessment of the impact of the proposed changes on revenues, jobs and policyholder servicing, and called for a glide path for brokers similar to the transition proposed for insurers. Industry representatives said the changes could also have implications for insurance penetration and customer servicing.

 

 

They said the proposed changes to commissions and expenses of management (EoM) could make a substantial part of the broking business economically unviable. The industry could lose as much as 70 per cent of its revenue under the proposed architecture, while around 1 million distribution jobs could be at risk. Corporate broking, where 60-70 per cent of jobs could be affected, could be particularly vulnerable.

 

The representatives also cautioned that the proposed changes could encourage unethical practices, with excess commissions potentially being disguised as marketing fees or other payments.

 

Pavanjit Dhingra, director, IBAI, said, “There will be job loss, reduction of salary of existing people also. There will be 60-70 per cent revenue loss. Out of 83 lakh people, the minimum we expect is 10 lakh job losses.” He added that the association has requested an extension of the deadline for submitting feedback until the end of December.

 

According to Irdai data, premiums sourced through brokers in general insurance grew 37 per cent between FY23 and FY25, while commissions paid to brokers rose 173 per cent during the same period. Average commission rates increased from 8.5 per cent to 17 per cent.

 

The industry argued that a reduction in commission rates would not automatically translate into lower costs for policyholders, as distributors incur expenses for customer acquisition, policy issuance, renewals, servicing and claims assistance. The impact could be more severe for low-ticket policies, where the commission earned may not be sufficient to cover the cost of reaching and servicing customers.

 

Brokers also cautioned that consolidation or a reduction in the number of distributors could weaken customer access, particularly for smaller customers and businesses, and reduce the availability of intermediaries who assist policyholders during claims.

 

The representatives also argued that brokers and agents should not be treated alike, given differences in their responsibilities and regulatory obligations. They urged the regulator to undertake a deeper assessment of the potential unintended consequences before finalising the proposed reforms.

 

Separately, Sanjib Jha, founder and MD, Coverfox, said, “Distribution in India is still a people-intensive business, particularly when it comes to reaching customers in Tier II, Tier III and rural markets. There are millions of individuals working across agents, point-of-sale networks, brokers, field teams and allied distribution functions, and any significant change in the economics of distribution will inevitably have an impact on this workforce.”