Insurer commissions have surged far faster than premiums. Between 2022-23 and 2024-25, payouts rose sharply, raising questions over the economics of insurance distribution
Irdai wants commissions linked to the product, segment, channel, complexity and effort involved, while also tightening insurers’ expense limits
High upfront commissions can encourage distributors to prioritise sales over suitability. Lower, better-aligned payouts could help curb mis-selling and improve consumer outcomes
India’s insurance penetration was only 3.7% of GDP in 2024-25. Lower commissions must not make low-ticket policies unattractive to sell to poorer households
Deferring part of first-year commissions, linking payouts to policy persistency and clawing back commissions on early lapses could better align distributors with customers
The mutual-fund industry shows cost reforms need not constrain growth. Insurance must build awareness and demand while reducing distribution costs to deepen coverage