High commissions a key concern, need attention: Irdai chairman Ajay Seth

Insurance regulator says rising commissions and weak profitability are undermining policyholder value and sector resilience

The sharp rise in insurance industry commissions suggests the sector remains structurally high-cost, Insurance Regulatory and Development Authority of India (Irdai) Chairman Ajay Seth said at the authority’s 133rd meeting, held in December 2025, the minutes of which were released on Thursday. 

 

He cited the industry’s heavy reliance for growth on expensive intermediary-driven distribution instead of cost-efficient digital transformation as a reason behind the elevated cost. He flagged this as an area that warrants regulatory attention and intervention, 

 

“High front-loaded acquisition costs erode policyholder value in long-term products, leaving low asset build-up in early years and minimal surrender value on early exit. This cost structure undermines trust and persistence, as early exits effectively wipe out the policyholder’s principal while weakening the sector’s overall value proposition”, Seth said. 

 

He also highlighted the need for regulatory attention and intervention in areas such as weak core profitability marked by persistent underwriting losses across segments among non-life insurers — particularly public sector general insurers, apart from a continuous rise in complaints in the non-life insurance sector driven by health and motor insurance. He also flagged increasing surrender rates in life insurance impacting asset-liability management.

 

Another area of concern was the growing dependence on cross-border reinsurers (CBRs) along with rising outward premium flows implying higher foreign exchange outgo, Seth said. 

 

The Irdai chairman also reviewed industry performance and outlined a series of regulatory priorities for strengthening governance, policyholder protection and sector resilience. He said the insurance industry’s premium growth moderated sharply into single digits, lagging nominal GDP growth, hinting at a normalisation after the post-Covid surge. Total premium collections stood at ₹8.02 trillion up to November 2025, up 9.86 per cent year-on-year (Y-o-Y).

 

Life insurance continued to dominate the market, with nearly 80 per cent share of total premium income, ₹5.8 trillion in collections and 10.48 per cent growth. General insurers collected ₹2.22 trillion in gross direct premium, up 8.29 per cent Y-o-Y.

Irdai also reviewed the sector’s financial stability indicators. Insurers’ assets under management (AUM) rose to ₹78.48 trillion as of September 2025, from ₹72.08 trillion a year earlier. Around 59 per cent of investments remain parked in government securities, while nearly 30 per cent are in approved investments.

 

The Irdai Chairman said there are nearly eight applications pending for insurance registration in R1 stage and one in R2 stage as part of the regulator’s three-stage approval process.

 

“Six out of eight applications in the R1 stage have been received in the last two to four months and are under examination. There are two applications at R1 stage that are more than a year old. Owing to certain regulatory concerns, these applications are under thorough examination,” Seth said.

 

“One applicant has obtained a no-objection certificate (NOC) from Irdai to commence the process of registering as an insurer. Further, about seven applications requesting approval of shareholding transfer of non-life Insurers and five life insurer applications have been approved till date in this financial year,” he added.

 

Seth said Irdai will issue a draft consultation paper on the implementation of Indian Accounting Standards (Ind AS) by the insurance sector.