IBAI Flags Job Loss and Other Concerns Over IRDAI’s Proposed Insurance Distribution Reforms

On 23 September 2026, the Insurance Regulatory and Development Authority of India (IRDAI), India’s insurance regulator, released a consultation paper titled “Reforms for Recalibrating the Economics of Insurance Distribution” proposing a wide range of reforms in insurance distribution. Since its publication, the paper has been attracting active concerns and feedbacks from several stakeholders from the insurance industry. 

The paper remains open for public comment and stakeholders are able to submit their comments until 25 October 2026. IBAI said in a statement that it supports the regulator's wider aims of strengthening policyholder protection, increasing transparency, reducing mis-selling and expanding insurance coverage. 

It also backed several measures proposed in paper, including prohibition of compulsory bundling of insurance with loans, enforceable suitability obligations, clawback of commissions for proven mis-selling, greater transparency in related-party payments and identity tagging of salespersons. However, the IBAI also raised concerns over certain proposals in the paper.

In this article, we will take a look at major concerns raised by IBAI over proposed commission caps, potential job losses, their impact on insurance distribution and the association’s recommendations to India’s insurance regulator.

What is IBAI?

IBAI full form is Insurance Brokers Association of India, which is the primary trade association representing insurance brokers in India, including direct, composite and reinsurance brokers. It was established 25 years ago in 2001. At present, it represents a total of 798 IRDAI-licensed insurance brokers in the country. According to Insurance Brokers Regulations, 2002, it is mandatory for all insurance brokers to be registered as IBAI members. 

The main aim of this association is to encourage and promote interaction among its members as well as to facilitate and protect their interests. From time to time, IBAI provides feedback on IRDAI proposals and advocates for betterment of insurance brokers. 

Key Highlights:- Concerns Raised by IBAI

The table below provides a summary of major concerns raised by IBAI regarding proposed commission caps, job losses, insurance distribution, market competition and regulatory changes outlined in IRDAI’s ‘Reforms for Recalibrating the Economics of Insurance Distribution’ consultation paper:-

Concerns Over Proposed Commission Caps 

The concerns raised by IBAI centre on consultation paper’s proposed overhaul of economics of insurance distribution. The proposal would reintroduce more than 30 product- and channel-specific commission caps and reduce overall Expense of Management (EoM) limits by roughly one-third over a five-year glide path. According to IBAI, these measures could ultimately work against interests of the very policyholders the reforms are intended to protect. 

According to IBAI, every policyholder in India has the option to buy insurance directly from an insurer. However, most individuals and nearly all businesses still choose to appoint an insurance broker instead. The reason behind this is that brokers are the only distributors legally obligated to act in best interests of customer rather than insurer. Their role is essential as they negotiate coverage, compare market options and advocate for customer in claims. 

It’s important to have someone who works for the policyholder rather than the insurer. The association pointed out that the document fails to differentiate between insurance sold directly to a customer and insurance chosen by the customer through an advisor of their choice. It suggests paying the customer’s own broker less than what the insurer’s tied agent would receive, which is a shift from the insurance regulator’s longstanding position since brokers were introduced in 2002. 

IBAI said that, according to IRDAI’s own data, 69% of complaints against general insurers are related to claims while 63% of complaints filed on IRDAI’s portal are decided in favour of customers. In a market where claims are the main concern for policyholders, weakening the role of the one participant whose responsibility is to protect customer interests may not serve customers well.

Concerns Over Data Supporting Proposed Reforms 

According to IBAI, the figures in the paper indicate a decrease in total management expenses for general insurance, which fell from 28.2% of premiums in FY2022-23 to 26.5% in FY2024-25. The premiums, however, experienced an annual growth of approximately 13%. IBAI pointed out that the apparent increase in reported commissions during this period largely stems from reclassification of payments that were previously recorded under different categories, a change acknowledged by paper itself. 

Additionally, IBAI highlighted the paper identifies high commissions as predominantly concentrated in captive channels where customers have limited choice. However, it applies caps to all distribution channels and sets lowest limits for independent brokers. IBAI noted the paper’s presentation includes certain outlying figures for commissions and margins that do not properly reflect industry averages. 

It suggested that excessive remuneration especially in situations where customers have limited options should be regulated through fair conduct rules. However, it highlighted that majority of brokers happen to operate on modest margins. A more balanced representation of data would allow for a better consultation process. 

Proposals Could Result in Job Losses Across the Insurance Sector

The IBAI emphasized that as of 31 March 2025, insurance brokers sponsored INR 14.81 lakh of total INR 27.18 lakh for point-of-sale personnel in India. This sponsorship includes 16,230 out of 26,316 motor insurance service providers. The majority of them are self-employed in Tier-2 and Tier-3 towns, alongside professionals who are directly employed by broking firms.

IBAI warned that implementing commission caps, under which intermediaries earn less than the cost of serving customers, will hinder access to these clients and defeat the primary goal of the reform. Additionally, the association pointed out that an expense limit for insurers, reduced by more than 30% over five years, cannot be achieved through efficiency alone. 

As a result, insurance companies may need to cut back on sales, servicing and claims teams. This would affect both private and public sector insurers. These challenges are currently affecting industry and changes proposed in consultation paper may produce outcomes opposite to what was intended, IBAI highlighted.

“Insurance is a people business,” said a spokesperson for IBAI. “The paper will reduce the people who reach customers in small towns and the people who service them inside insurers, and it contains no mechanism to ensure that the savings reach policyholders as lower premiums.”

Impact on Insurance Distribution and Market Competition

If proposals get implemented, they will reduce distribution reach at a time when India's “Insurance for All by 2047” agenda demands increased outreach, according to IBAI. Furthermore, these changes will impact different segments of the industry in varying ways. The IBAI placed emphasis on the fact that public sector insurers, small and emerging insurers, standalone health insurers and listed insurers all face unique challenges regarding compliance, cost structure and capital under a uniform regulatory framework. 

The combined effect of over 30 new limits, a one-third reduction in the expense ceiling, and significant new compliance requirements creates a non-level playing field, which ultimately hampers the ease of doing business as well as market dynamics. 

Additionally, these proposals overturn a framework that has been in place for three years before its scheduled review in 2028 and without a regulatory impact assessment. This change comes at a crucial time when the sector has opened up to 100% foreign investment, which makes regulatory stability more important than ever, the IBAI pointed out. 

Commission Caps:- Lessons from Global and Indian Experience 

IBAI noted that 18 out of 20 largest non-life insurance markets worldwide impose no commission caps on commercial lines. It further pointed out that leading regulators place their focus on supervising conduct, conflicts of interest and fair value rather than focusing on controlling prices. They also require commission disclosures to customers upon request, which is a standard that Indian regulations already meet. 

According to IBAI, India’s own experience with commission caps between 2002 and 2023 resulted in disguised payments and tax non-compliance, issues that were addressed through 2023 reforms. IBAI said it will urge IRDAI to retain the 2023 Expense of Management (EoM) framework, with tighter rules for calculating expenses if necessary. It also called for commission caps to be limited to credit-linked and other coerced-choice sales where the evidence presented in the consultation paper is strongest.

In addition, IBAI recommended that insurers be required to refund premiums to customers where such segments consistently record low claims ratios, similar to existing mechanisms under PMFBY, Ayushman Bharat and no-claim bonuses. It also called for commercial and large risks to be exempted and for a regulatory impact assessment to be published before any new regulation gets drafted.

“This is not an argument against reform. It is an argument for reform that reaches the policyholder,” an IBAI spokesperson said. They also added, “We will place our detailed response before IRDAI by 25 October and remain committed to constructive engagement with the regulator and the Government.”

Also Read: IRDAI Proposes Free Insurance Price Access Without Personal Information

To Wrap Up

The IRDAI’s proposed reforms in “Reforms for Recalibrating the Economics of Insurance Distribution” consultation paper are intended to strengthen policyholder protection, improve transparency, address mis-selling and expand insurance coverage across the country. However, the proposals have raised serious concerns among stakeholders, including IBAI, particularly over commission caps, potential job losses and their impact on insurance distribution. 

The association says some of the measures could limit the reach of distribution, especially in smaller towns and undermine the role of independent brokers. Hence, the association has requested IRDAI to take a balanced and evidence-based approach. It has also asked the insurance regulator to do a regulatory impact assessment before making the proposed changes. 

Frequently Asked Questions (FAQs)

Q1. What is the “Reforms for Recalibrating the Economics of Insurance Distribution” consultation paper?

A. It is a consultation paper issued by IRDAI, which proposes reforms in insurance distribution, including changes to commission and EoM frameworks.

Q2. When was the IRDAI insurance distribution reforms consultation paper 2026 released?

A. IRDAI released the consultation paper on 23 September 2026.

Q3. What is the last date for submitting comments for the IRDAI consultation paper 2026?

A. Stakeholders can submit their comments to IRDAI until 25 October 2026.

Q4. What concerns has IBAI raised?

A. IBAI has raised several concerns, including concerns over commission caps, lower EoM limits, potential job losses and reduced insurance distribution reach, particularly in smaller towns.

Q5. When are the proposals made by IRDAI in the insurance distribution consultation paper 2026 expected to come into effect?

A. There is currently no confirmed effective date for the proposed reforms. IRDAI has invited comments from stakeholders until 25 October 2026. After reviewing feedback and considering representations received, the insurance regulator shall decide on final regulatory framework as well as its implementation date.

Q6. Will insurance brokers earn less than individual agents under the new IRDAI proposal? 

A. Yes, in several major categories. In IRDAI’s Reforms for Recalibrating the Economics of Insurance Distribution consultation paper, the proposed commission caps for brokers and other distribution entities are lower than those for individual agents in some products.

Author: Dushyant Sharma

Hey there, I'm Dushyant Sharma. With the extensive knowledge I've gained in past 8 years, I have been creating content on various subjects such as banking, insurance, finance and all the important registration and licensing processes for various companies. I'm here to help everyone with my expertise in these areas through my articles.