IRDAI’s consultation paper proposes a broad recalibration of insurance distribution economics, encompassing EoM, distributor commissions, distribution architecture and customer protection. The proposal envisages a phased decline in company-level EoM ceilings to 15% and 12.5% for life insurers, and 25% and 20% for general insurers (from 30%) over the next two and five years, respectively. Additionally, tighter product- and channel-specific commission caps have been prescribed. The proposed reforms could lead to near-term pressure on distributor profitability and industry growth. Over the longer term, the reforms are expected to improve cost efficiency, pricing transparency and policyholder value, supporting higher insurance penetration.

• Sharp cuts in commission caps could lead to pressure on distributor profitability, driving greater focus on cost efficiency, scale, productivity and cross-selling.
• A near-term moderation in industry growth is likely, following the implementation of the proposed regulations.