The first full picture of who pays under IRDAI's commission caps arrived on September 25. The proposed limits take term insurance from 51 percent to 25-30 percent, health insurance from 24 percent to 15-20 percent, motor from 26 percent to 0-15 percent and savings plans from 14-37 percent to 5-25 percent. Alongside them sit stricter expense targets: 12.5 percent of premium for life insurers and 20 percent of gross direct premium income for general insurers over five years.
What distributors and analysts say
- Two-wheelers: Indraneel Chatterjee, COO and co-founder of InsuranceDekho, said that if that commission goes away, the share of uninsured vehicles on the road, already close to 60 percent in the two-wheeler segment, is likely to rise further.
- Agent income: PB Fintech told investors that agents who earned up to Rs 15,000 selling a health policy could see that fall to Rs 3,500-3,750, and that 25-33 percent of the net present value of its non-life business could be affected while life stays largely unaffected. An IIFL report estimated a 33 percent hit to its core insurance revenue.
- Banks: the bancassurance pool has grown at a 28 percent compound rate over three years to more than Rs 20,000 crore, contributing about 10 percent of banks' fee income. Exposure is highest at Axis Bank, then HDFC Bank and Kotak Mahindra Bank, and negligible at ICICI Bank and state-owned banks.
- NBFCs: analysts put the hit at 12-15 percent of profit before tax.
- Penalties for missing expense targets: restricted product launches, dividend payments and new business through the channel responsible for the breach.
Implication
Cheaper distribution only reaches your premium if insurers pass the saving through, and the history of caps suggests that part is negotiated later. The sharper risk is on the other side: a two-wheeler that goes uninsured because no one earns enough to sell it is a worse outcome than a commission ever was. Health servicing is the other exposure, since restrictions on agents in retail health would hand business to standalone health insurers while renewal servicing quality depends on what renewals are allowed to pay.
Action
Two things to watch before the October 25 deadline: whether small-ticket motor gets a floor or a carve-out so rural and two-wheeler cover keeps a seller, and whether any insurer commits to passing caps into premium. If you ride a two-wheeler, check that your policy is active now rather than waiting for a call that no longer pays anyone to make.