IRDAI Proposes New Insurance Commission Rules: What Could Change for Policyholders

September 24, 2026 Trendora Feed 0 Comments

India’s insurance regulator has proposed major changes to the way insurers pay commissions to agents, banks and online platforms.

The Insurance Regulatory and Development Authority of India (IRDAI) wants to change the economics of insurance distribution. The proposals could affect life, health and general insurance products.

The plan has already caught the attention of insurers, banks and online insurance platforms. Shares of several companies linked to insurance distribution fell on September 24, 2026. PB Fintech, the parent company of Policybazaar, saw the biggest market reaction.

However, the changes are not final yet. IRDAI has released them for consultation. The regulator will consider industry feedback before deciding on the final rules.

What Has IRDAI Proposed?

IRDAI wants tighter controls on commissions that insurers pay to distributors.

Insurance companies use several channels to sell their products. These include individual agents, banks, brokers and online insurance platforms.

Distributors usually earn a commission when they sell a policy. Under the proposed framework, IRDAI wants to set limits based on the type of insurance product and distribution channel.

The proposal could change how much distributors earn from each policy.

IRDAI also wants the insurance market to focus more on customer interests. The regulator is looking at distribution costs, sales practices and the incentives offered to sellers.

Why Does IRDAI Want to Change Insurance Commissions?

Insurance distribution can be expensive.

Companies often pay agents and other distributors to bring in new customers. Those payments form part of the cost of selling insurance.

High commissions can also create a conflict of interest. A seller may have a financial reason to promote a product that pays a higher commission.

IRDAI’s proposal aims to address this issue by placing tighter limits on distributor payments. The changes could also push companies to review how they sell policies.

The final impact will depend on the rules IRDAI adopts after consultation.

What Could Change for Insurance Policyholders?

Customers may not see an immediate change.

The current rules continue to apply because IRDAI has not yet made the proposed framework final.

Over time, tighter commission rules could change how insurers and agents market policies. Customers may also get clearer information about distribution costs and sales incentives.

The main areas to watch include:

commissions paid to insurance distributors;
incentives offered for selling policies;
disclosure of distributor payments;
insurance sold with loans and other financial products;
measures aimed at reducing mis-selling.

These proposals mainly target the distribution system. They do not mean existing insurance policies will suddenly change.

IRDAI Takes Aim at Insurance Mis-Selling

Mis-selling has long been a concern in the insurance industry.

It can happen when a seller gives a customer incomplete information or pushes an unsuitable policy. Problems can also arise when customers do not fully understand exclusions, charges or long-term payment commitments.

Sales incentives can influence these decisions.

IRDAI wants stronger controls around the way distributors sell insurance. The proposed framework could make sellers more accountable for the policies they recommend.

That may encourage distributors to focus more on customer needs instead of sales volume alone.

Insurance Sold With Loans Is Also in Focus

Insurance products are often offered with loans.

For example, a bank may offer insurance when a customer takes a home loan, car loan or personal loan.

Some loan-linked insurance products can provide useful financial protection. They may help cover an outstanding loan if an insured borrower dies, depending on the policy terms.

Problems arise when customers believe they must buy a particular insurance policy to get a loan.

IRDAI’s proposed changes also examine this part of the distribution market.

Stronger rules could make it clearer whether a policy is optional. Customers may also get more freedom to compare products before buying insurance linked to a loan.

What Could the New Rules Mean for Banks?

Banks play a major role in selling insurance in India.

Many insurers use banks to reach customers through branches, relationship managers and digital banking services. Banks can earn commission when customers buy policies through them.

This model is known as bancassurance.

Tighter commission limits could reduce some of that fee income. The actual effect would differ from bank to bank.

A bank that earns a large amount from insurance distribution could feel a bigger impact than one with limited exposure.

For now, the proposed rules do not change bank commissions immediately. Companies must wait for IRDAI’s final decision.

Why Did PB Fintech Shares Fall?

The proposals triggered a sharp reaction in the stock market on September 24.

PB Fintech shares fell as much as 36% during trading, according to Reuters. The company owns Policybazaar, one of India’s largest online insurance marketplaces.

Investors focused on the possible effect of lower commissions on its insurance distribution business.

PB Fintech co-founder and group CEO Yashish Dahiya later told analysts that the proposed caps could have a severe impact on parts of its non-life insurance business. The company may need to rethink some spending and expansion plans if the proposals become final in their current form.

Still, the market reaction should not be confused with the final impact of the regulation.

IRDAI can change the proposals after receiving feedback.

Other Insurance-Linked Stocks Also Came Under Pressure

PB Fintech was not the only company affected.

Shares of other businesses with exposure to insurance distribution also declined as investors studied the proposals. The concern centered on companies that receive meaningful income from selling insurance products.

The effect would not be the same for every company.

For a distributor, commission is a source of revenue. For an insurer, commission is part of the cost of selling policies.

That difference means the proposed changes could create different outcomes across the sector.

Could Insurance Become Cheaper for Customers?

Lower commissions do not automatically mean lower premiums.

An insurance premium depends on several factors. These can include risk, expected claims, operating expenses, product design and other costs.

IRDAI’s existing life insurance framework already requires insurers to ensure that premiums and charges are fair and properly reflect the product’s benefits and terms.

Lower distribution costs could reduce expenses for insurers. However, customers should not assume that every saving will directly reduce premiums.

The final rules will determine how much the distribution model actually changes.

Could Insurance Agents Earn Less?

Agents could see changes if IRDAI introduces lower commission limits.

The size of the effect would depend on the product they sell and the final commission structure.

Agents remain an important part of India’s insurance market. Many customers rely on them to understand policies, complete paperwork and manage service-related issues.

Therefore, regulators must balance lower distribution costs with the need for a sustainable sales network.

The current proposal starts that discussion. It does not establish agents’ final future earnings.

What About Online Insurance Platforms?

Digital platforms have changed how Indians compare and purchase insurance.

Customers can now compare premiums and policy features online before making a decision.

These platforms can earn commissions when customers purchase insurance through them.

Lower commission caps could affect their revenue from certain products. That explains why investors reacted strongly to the IRDAI proposals.

Platforms may respond by changing costs, marketing spending or business strategies if IRDAI adopts the proposed limits.

Any major change will depend on the final regulations.

Why Transparency Matters for Insurance Buyers

Insurance can be difficult to understand.

A policy may contain exclusions, waiting periods, deductibles, surrender conditions and other important terms.

Customers should know what they are buying and why a particular product has been recommended.

More transparency around commissions can provide additional context.

For example, a customer may want to know whether a seller receives different compensation for recommending one product instead of another.

Clearer disclosures can help customers ask better questions before making long-term financial commitments.

What Should Customers Check Before Buying Insurance?

Consumers should not choose an insurance policy only because an agent, bank employee or online platform recommends it.

Start by checking what the policy actually covers.

Look at the premium, exclusions and waiting periods. For long-term products, check how long you need to continue paying premiums.

Customers should also understand surrender conditions before buying a life insurance policy.

Health insurance buyers should carefully review room-rent limits, waiting periods, co-payments and exclusions where applicable.

When insurance comes with a loan, borrowers should ask whether they must buy that particular policy.

These checks remain important regardless of whether IRDAI changes the commission rules.

Existing Policyholders Do Not Need to Panic

The consultation does not cancel existing policies.

It also does not mean customers must replace their current insurance plans.

Anyone who already holds a policy should continue following its existing terms unless the insurer officially communicates a valid change.

Policyholders should avoid cancelling a useful policy simply because of headlines about the proposed commission rules.

They should first check their policy documents and contact their insurer if they have questions.

What Can Customers Do If They Have an Insurance Complaint?

IRDAI operates the Bima Bharosa grievance system for insurance customers.

Policyholders can use it to register complaints involving insurers and other insurance entities. Customers can also track their complaints through the system.

IRDAI says complaints first go to the relevant insurance company. If the customer remains dissatisfied, the matter can move to IRDAI for review in cases involving possible regulatory violations.

The regulator also warns consumers that Bima Bharosa does not charge policyholders for resolving complaints. Customers should be careful with people asking for payments or QR-code transfers while claiming to represent the service.

Are IRDAI’s New Commission Rules Already in Force?

No.

The commission changes currently being discussed are proposals.

Insurance companies, banks, distributors and other stakeholders have an opportunity to respond before IRDAI finalizes the framework.

That distinction matters for both customers and investors.

The sharp movement in insurance-related stocks reflects expectations about what the proposals could mean. It does not mean the proposed limits have already taken effect.

What Happens Next?

Insurance companies, banks, agents and digital platforms will study the proposals and their possible impact on business.

Industry feedback could also lead IRDAI to modify parts of the framework before issuing final regulations.

Until that process ends, policyholders should continue to follow the terms of their existing insurance policies.

The next important development will be IRDAI’s decision on the final framework. That will show which proposed commission limits and distribution changes actually become part of India’s insurance rules.