Life insurers with a higher share of credit-life business in their annualised premium equivalent could be the biggest beneficiaries of IRDAI's proposed commission changes, according to a Centrum report cited by ANI on September 25. The logic is direct: under the proposed framework, commission rates for credit-life products could fall to 2 percent, from levels the consultation paper puts at roughly 28 percent today, and credit-heavy balance sheets carry more of that cost than anyone else.

What Centrum expects

  • Expense caps with a clock: company-level expense of management for life insurers at 15 percent of gross direct premium income within two years, starting from FY28, and 12.5 percent within five, replacing the current aggregate ceiling. Top-performing low-cost insurers could reach about 10 percent.
  • Indirect payouts pulled inside the cap: marketing allowances, infrastructure support and travel incentives count against statutory commission limits, closing the side channel that grew after 2023.
  • Bancassurance conduct rules: financial institutions would be barred from linking approval of a credit facility to the purchase of insurance, and volume-linked bonuses, international trips, contests and gifts for bank and NBFC staff would be prohibited.
  • Architecture rewarded: open-architecture distribution would get higher commission ceilings than exclusive tied arrangements.

Implication

For credit-life-heavy insurers, a margin win arrives together with a conduct test. Loan-linked cover is where mis-selling complaints cluster, and the same draft that cuts its commission also bars linking a loan to a policy. For distributors, Centrum expects the shift to show up as focus on retail protection products, leaner expenses and lower volumes in select categories as distributors adjust to reduced commissions. That is the volume risk NBFC and fintech channels have been flagged for since the paper was published.

Watch

Three things decide whether this view holds: whether the final rules keep credit life at 2 percent, whether bundling restrictions survive industry feedback before the October 25 deadline, and whether expense discipline shows up in results as lower costs or simply as lower payouts to the people selling.