IRDAI Wants to Put Commission Caps Back. What It Means If You Sell Insurance

In 2023, IRDAI removed the cap on commission for each product. The IRDAI (Payment of Commission) Regulations, 2023 provide that insurers determine their own rates through a policy approved by the board. The only ceiling left was an overall limit on Expenses of Management. Rewards and bonuses were folded in and counted as commission too.

That opened things up. Then came three years of data.

On 23 September 2026, IRDAI put out a paper called Recalibrating Economics of Insurance Distribution. It wants the caps back. This time, the cap would vary by product, channel, complexity, and the work required to sell and service.

Nothing has changed yet. This is a paper asking for views. Comments are open until 25 October 2026.

If you sell insurance alongside mutual funds, this is the biggest thing on your desk this month. And the half worth reading is not the half in the news.

Why IRDAI Moved

The case in the paper is simple. What distributors get paid has grown far faster than the business under it. Between FY23 and FY25:

Over the same period in IRDAI's own analysis, the number of individual life policies stayed broadly flat. More was being paid to sell insurance. Not many more people ended up insured.

On the conduct side, IRDAI's annual report records 26,667 complaints against life insurers about mis-selling in FY25. That is up about 14% from 23,335 the year before.

Use that figure carefully, because it is being quoted loosely. It counts mis-selling complaints against life insurers. Not the whole industry. Not every kind of unfair practice. It is still a big number, and it is still rising. It is just smaller than some coverage suggests.

Coverage of the paper also quotes first-year commissions averaging around 51%, with some as high as 81%. Treat that as a first-year figure in general, not a term insurance figure, unless you have checked the paper yourself.

The Proposed Caps

These are proposals. None of them is in force.

 Two things stand out.

Agents get a better deal than firms in every row. That is on purpose. The paper ties pay to effort. A person selling and servicing a policy face-to-face does more of the work than a platform pushing it through.

Smaller places get more. The paper allows extra pay, above the normal caps, for sales in small towns of up to 50,000 people, in rural areas, and in cities of up to 10 lakh. If your book sits in a Tier 2 or Tier 3 town, this is the line that matters most to you.

The Half That Is Getting Missed

Nearly all the coverage is about the caps. The same paper moves the other way on getting in.

IRDAI has proposed simpler sign-up, much lower entry and capital requirements, and lower fees for distributors. It also wants to give them more freedom to do insurance alongside other work, financial or otherwise.

Put those two ideas side by side, and the intent is clear.

It gets harder to live on insurance commission alone, and easier to add insurance to something else.

That is not a small point. It is the whole difference between two kinds of business, and it decides who this hurts.

What It Means, Depending On What You Sell

The honest read. If your income rests on a big first-year commission from one product line, this paper is aimed straight at it. If insurance is one of several things you do for the same family, you lose some pay per policy and gain a cheaper, simpler way in.

No one can tell you the net effect yet. Anyone who claims to is guessing. What can be said is which way each kind of business gets pushed.

The Mis-selling Rules Are the Bigger Story

The percentages make the headlines. These change how the job is actually done.

The paper proposes:

• Writing down what the customer needs and why the product suits them, for every sale
• Counting all pay, direct and indirect, as commission
• Banning target- and reward-based incentives for bank and NBFC staff selling insurance
• Naming the seller on each policy sold
• Making mis-selling records public
• Taking commission back where mis-selling is proved
• Tracking dark patterns and performance data - which means insurance companies can't ask for your phone number before displaying the premium/quote.

Two of those deserve a partner's full attention.

Money taken back. If commission can be recovered where mis-selling is proved, a sale is no longer final the day it settles. That changes how the file is built, not just how the meeting goes.

Your name on the policy. Once a person is tied to each policy, conduct stops being a company statistic. It becomes your own record.

A partner who already writes down why a product was picked, and keeps that on file, has almost nothing to do here. A partner who does not has been given about four weeks of warning.

You Have Until 25 October

This is the part most partners will skip, and it is the only part they can actually act on.

The paper is open for comments. IRDAI has asked for them. Distributors count.

If you sell in a small town or rural area, the extra pay for smaller places is the best thing in this paper for you. It will only survive if the people it is meant to help say it matters.

If you sell more than one product, the freedom to mix insurance with other work is the part worth defending.

If you think a cap is set wrong for the work involved, say which one and why, with your own numbers. A comment describing real work on a real product beats a general complaint.

The paper is at iib.gov.in/dr. Read the parts that touch your own products before you comment. Do not rely on a summary.

What to Tell a Client Who Asks

Some clients will see a headline saying commissions are being cut. They will ask what it means for their policy.

Keep it short. Do not guess.

What not to say. Never tell a client to buy now, before commissions change. That is a sales line dressed as news. The paper has no such effect on a policyholder, and this is exactly the behaviour it exists to stop.

Why a Multi-Product Book Survives This

Strip out the detail, and there is one lesson for a distribution business.

A book earning from one product lives or dies by one regulator's view of it. The pay can be rewritten in a single paper, as it was in 2023 and is being now. A partner whose whole income sits in first-year insurance commission has no defence against that, and no warning beyond a comment window.

A book earning from several products, across the same families, does not. Mutual fund trail, insurance, fixed deposits, bonds, broking, a loan against mutual funds. Each has its own regulator and its own cycle. When one gets repriced, the rest do not.

That is the real argument for breadth, and it is not a sales point. A successful mutual fund distributor with four income lines can absorb a change like this. A one-product business has to rebuild around it.

The paper pushes the same way. Easier entry, plus clear freedom to mix insurance with other work, is a regulator saying fairly plainly that it expects this to be a multi-product business.

Wealthy partners already sell mutual funds, insurance, fixed deposits, bonds, broking and a loan against mutual funds on one platform. They get a household view and Instant KYC in under two minutes. If this paper becomes rules, that is the shape of business it was written for.

If you hold an ARN, see what a mutual fund distributor business looks like with more than one income line on it. If you are still working out how to become a mutual fund distributor, start there.

Disclaimer: This article is for education only and is not investment, insurance, tax or legal guidance. The commission limits described are proposals under consultation and are not in force. Insurance is the subject matter of solicitation. Distributors should only offer products they are registered and qualified to distribute, and distributing insurance requires a separate IRDAI registration that an ARN does not confer.