IBAI’s objections to the draft reforms The Insurance Brokers Association of India (IBAI), representing 798 brokers, has formally objected to the Insurance Regulatory and Development Authority of India’s (IRDAI) consultation paper titled *Reforms for Recalibrating Economics of Insurance Distribution*, released on 23 September 2026. While the regulator’s stated goals—enhancing policyholder protection, curbing mis‑selling and improving transparency—are broadly supported, IBAI says the paper’s core mechanism will backfire.
Commission caps and expense ceiling cuts The draft proposes more than thirty distinct commission caps, varying by product and distribution channel, alongside a 33% reduction in the overall expense‑of‑management limit for insurers. IBAI notes that the paper does not differentiate between insurance purchased directly by a customer and insurance chosen through an independently appointed advisor. Under the proposal, a customer’s own broker could earn less than a tied agent, reversing the regulator’s stance since brokers were introduced in 2002.
Potential impact on policyholders and distribution According to IRDAI data cited by IBAI, 69% of complaints against general insurers relate to claims, with 63% of portal complaints resolved in the customer’s favour. The association warns that lowering broker remuneration below the cost of servicing customers—particularly the 14.81 lakh point‑of‑sale persons and 16,230 motor‑insurance service providers that brokers currently sponsor—could shrink the network that reaches Tier‑2 and Tier‑3 towns.
IBAI also highlights that insurers’ management expenses fell from 28.2% of premium in FY 2022‑23 to 26.5% in FY 2024‑25, while premiums grew roughly 13% annually. The apparent rise in reported commissions during that period largely reflects a re‑classification of payments, not higher payouts. Applying uniform caps across all channels, especially the lowest limits for independent brokers, could therefore distort the market.
Wider industry concerns The association argues that a uniform, steep expense‑limit cut cannot be offset by efficiency alone; insurers may be forced to trim sales, servicing and claims staff, affecting both public‑sector and private insurers. This runs counter to the “Insurance for All by 2047” agenda, which relies on expanding distribution reach.
IBAI also points out that the proposals overturn a three‑year‑old framework before its scheduled 2028 review and do so without a regulatory impact assessment—an omission that could undermine confidence at a time when the sector has opened to 100% foreign investment.
Suggested alternatives In its response, IBAI recommends: - Retaining the 2023 expense‑of‑management framework, tightening computation rules only if needed. - Limiting caps to credit‑linked and other coerced‑choice sales where evidence of excess commissions is strongest. - Requiring insurers to refund premiums in segments with persistently low claim ratios, similar to existing schemes like PMFBY and Ayushman Bharat. - Exempting commercial and large‑risk business from caps. - Publishing a comprehensive regulatory impact assessment before finalising any rule.
IBAI will submit its detailed response by 25 October and remains open to constructive dialogue with IRDAI and the government.