BFSI Insight Summit 2026: Life insurers seek longer transition period

Industry leaders back customer-centric changes but flag impact of commission caps, expense limits, and uniform implementation timelines

Life insurers have urged the Insurance Regulatory and Development Authority of India (Irdai) to provide a longer transition period for implementing proposed distribution reforms, saying the industry needs time to adjust to tighter expense limits and changes to commission structures without hurting insurance penetration or weakening distribution networks.

 

At a panel discussion on “Distribution Reforms: The New Paradigm” at the Business Standard BFSI Insight Summit on Tuesday, industry leaders broadly welcomed the regulator’s push to improve customer outcomes but called for a more calibrated implementation timeline, arguing that insurers differ in their scale, distribution models, and cost structures.

 

The debate follows Irdai’s September 23 consultation paper—Recalibrating Economics of Insurance Distribution—which proposes bringing life insurers’ expenses of management (EoM) down to 15 per cent of gross direct premium income within two years, and to 12.5 per cent within five years. It also proposes tighter, product- and channel-specific commission limits, greater transparency in distribution costs, and safeguards against misselling.

 

 

Rushabh Gandhi, managing director and chief executive officer (MD & CEO), IndiaFirst Life Insurance, said the direction of the proposed changes was right but argued that the transition to the new expense limits needed reconsideration.

 

“Directionally, it is bang on; it couldn’t have been better,” Gandhi said, identifying tighter cost structures, wider reach, simpler distribution, and better customer outcomes as the key objectives. He suggested a longer glide path to the proposed 15 per cent EoM limit, noting that only two organisations currently met that benchmark. He also called for a review of commissions on pension products, particularly deferred annuities, while suggesting that the proposed commission structure for unit-linked insurance plans (ULIPs) could be challenging given existing reduction-in-yield restrictions.

 

Mahesh Balasubramanian, MD, Kotak Mahindra Life Insurance, said the central question was not whether the industry supported the reforms, but how smoothly they could be implemented.

 

Balasubramanian said that the reforms could make insurance products more affordable and accessible while helping customers stay invested for longer. He said lower distribution and operating costs could help insurers compete more effectively with other financial products. Over time, the industry could move from a model in which products are primarily sold by intermediaries to one in which customers actively seek out insurance.

 

Kamlesh Rao, MD & CEO, Aditya Birla Sun Life Insurance, said the implementation timeline would be crucial to achieving the regulator’s broader goal of expanding coverage. “The issue is not where the regulator wants us to go. The question is whether what is being recommended now is the destination, or should it be the starting point,” Rao asked.

 

He noted that Irdai wanted the new framework to take effect from April 1, 2027, and that insurers were discussing whether the transition should take three, five or seven years. India’s ambition of “Insurance for All by 2047” would require the number of policies to grow by around 7-8 per cent annually over the next two decades, he said. A more gradual reduction in costs could allow insurers to adjust their business models while continuing to expand distribution and coverage.

 

Rao also stressed the importance of bancassurance, saying banks had driven much of the industry’s growth over the past five years. Changes to the economics of bank-led distribution should, therefore, be phased in carefully to avoid undermining a key channel for insurance penetration, he said.

 

Alok Rungta, MD & CEO, Generali Central Life Insurance, said the reforms needed to account for differences in the starting positions of insurers, particularly newer players that were still investing in building their businesses.

 

“Everybody has to have the same landing point, but is it the same time? That is what is being discussed,” Rungta said, calling for the regulator to recognise differences in company size, scale, and history. He also cautioned against weakening the agency channel in the process of recalibrating bancassurance economics, saying insurers needed to preserve multiple distribution models and give long-term investors time to build their networks.

 

The panel also debated whether misselling was as widespread. Gandhi said insurers had strengthened suitability checks, pre-issuance validation calls, video consent, and data-led fraud detection, arguing that industry-level grievance ratios were declining.

 

Balasubramanian said customer dissatisfaction should not automatically be treated as misselling, as policyholders sometimes reconsider long-term savings commitments. However, he added that insurers and distributors shared responsibility for ensuring products were suitable and that safeguards were built into the sales process.

 

Rao called for a data-led assessment of the issue, pointing to the industry’s claims record and free-look provisions. Rungta, meanwhile, argued that regulation should preserve both bancassurance and agency-led distribution, particularly because building an agency network requires substantial investment and time.

 

Irdai has extended the deadline for comments on the consultation paper from October 25 to October 31, following stakeholder representations. The proposals remain under consultation and are not final regulations.