Indian government is moving toward placing limits on insurance agent commissions as part of broader reforms in the insurance sector under the newly introduced Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025. This policy shift aims to bring greater regulatory oversight, reduce distribution costs, and make insurance products more affordable for consumers.
🏛️ What the Government Is Proposing
Under the proposed Insurance Amendment Bill 2025, the government intends to empower the Insurance Regulatory and Development Authority of India (IRDAI) with clearer authority to cap agents’ commissions, remuneration, and rewards through regulations. IRDAI will be able to set maximum limits on commissions paid to insurance agents and intermediaries as part of its broader regulatory powers.
This provision is aimed at tightening oversight on payout structures and ensuring more transparency and fairness in how agents are compensated. According to sources, limits on commissions will be prescribed via IRDAI regulations within a specified timeframe after the Act’s passage.
📌 Why This Matters
📉 Reduce Cost of Insurance Products
One of the key goals of capping commissions is to help reduce the overall cost of insurance policies for consumers. High commission payouts can add to the cost burden on policyholders, especially in segments like health and life insurance.
🪙 Boost Affordability and Penetration
By controlling intermediary payouts, the government hopes to improve affordability, which could lead to higher insurance penetration in under-insured regions and among lower-income groups. Officials are reviewing the impact of rising health insurance premiums — partly driven by medical inflation — and see commission limits as one lever to manage costs.
📊 Improve Transparency and Market Discipline
Standardised commission limits are expected to bring transparency and consistency across the industry, aligning agent incentives with broader consumer-oriented goals rather than high upfront payouts.
🤝 Part of Broader Insurance Sector Reforms
The commission cap proposal comes alongside other significant reforms, including:
- Raising foreign direct investment (FDI) limit in the insurance sector to 100%, aiming to attract global capital and expertise.
- Enhanced regulatory oversight and disclosure norms.
These measures signal a major overhaul of India’s insurance regulation, focused on strengthening competition, enhancing consumer protection, and modernising the industry.
📋 What Happens Next?
The bill has been tabled in the Lok Sabha and is expected to move through parliamentary deliberations. Once passed, IRDAI will likely consult industry stakeholders before framing detailed regulations on commission caps, remuneration structures and related compliance requirements.
Experts suggest that final rules could be released within six months of the Act being enacted, offering insurers and intermediaries time to adjust their business models and payout structures accordingly.
🧠 Industry Reaction and Market Impact
The news of potential commission caps has already influenced markets. Shares of insurance-linked firms such as PB Fintech (Policybazaar) experienced downward pressure following reports of a regulatory push to restrict agent commissions — underscoring investor concerns about how such measures might affect distribution-led business models. The Economic Times
