Three organised groups have now told IRDAI what they think of the commission caps proposed in the "Recalibrating Economics of Insurance Distribution" paper released on September 23, and not one of them is asking for the caps to be simply dropped. The Insurance Brokers Association of India, which says it represents India's 798 licensed brokers, told the regulator on September 29 that the paper will "hurt policyholders, cost jobs and slow insurance growth", and asked it to keep the 2023 expense framework instead. The Life Insurance Agents Federation of India, speaking for nearly 15 lakh life agents, asked for grandfathering and warned against a "disproportionate" cut. And Coverfox founder Sanjib Jha wrote to IRDAI's chairman and members on September 29 objecting to what he calls a 2 percent commission limit on loan-linked protection, on the grounds that nobody will enrol and service a rural borrower for Rs 20.
Context: what each group is actually arguing
The brokers are arguing about arithmetic. IBAI's submission, reported on September 29, makes three statistical points: total expenses of management in general insurance fell from 28.2 percent of premium in FY2022-23 to 26.5 percent in FY2024-25 while premium grew about 13 percent a year; the apparent rise in reported commission "largely reflects the reclassification of payments previously reported under other heads", which the consultation paper itself acknowledges; and the paper relies "in places on outlying commission and margin figures that do not represent industry averages". Its substantive asks are to confine caps to credit-linked and other sales where the customer has little choice, exempt commercial and large risks, refund premium in segments that run persistently low claims ratios the way PMFBY and Ayushman Bharat already do, and publish a regulatory impact assessment before any draft regulation is written.
The agents are arguing about transition. LIAFI's secretary general B Markandeyulu, speaking to BusinessLine on September 29, said the federation has asked for provisions that grandfather existing agents, a level playing field for individual agents against corporate agents, banks and digital platforms, and a comprehensive impact study covering insurance penetration, policy persistency, rural and social sector coverage, agent livelihood, employment and policyholder servicing before anything is notified.
The fintech founder is arguing about access, and partly about the accounting. Jha's letter, reported on September 30, raises two points that also appear in the broker submission: some payouts were reclassified as commission after the 2023 reforms, and insurers lost input tax credit when individual life and health premiums became GST-exempt in September 2025, so how much of the rise in total expense is genuine additional cost cannot be read off the paper alone. His sharpest objection is to loan-linked cover. He cites the NABARD all-India financial inclusion survey for 2021-22, which found 52 percent of rural households carrying outstanding debt against 24 percent holding life insurance, and asks who will enrol and service a rural borrower for Rs 20, and at what quality. He also asks whether borrowers who receive cover through lenders would keep it if lenders stopped offering it, and whether the Authority knew about the consultation paper when it approved Turtlemint's June listing, which raised Rs 882.67 crore at Rs 152 a share against Rs 109.10 on September 24.
Implication: what the objections actually settle and what they do not
- None of the three asks for higher overall payouts. They ask for narrower caps, a phase-in and an assessment. That narrows the regulator's room to move, because IRDAI has already proposed the conduct rules they broadly support: banning forced bundling with loans, making suitability enforceable, clawing back commission on proven mis-selling, disclosing commission structures in plain language, and tagging the seller to the policy. A consultation that is agreed on conduct and disputed on quantum ends in a compromise on quantum, not on conduct.
- The arithmetic objection is the strongest and the hardest to answer. If a large part of the commission growth in the paper is reclassified marketing spend plus the loss of input tax credit after the GST exemption, then caps set from those totals will fall hardest on payments the regulator did not mean to cap. This is not a technicality: motor commission is the line the paper shows growing fastest, and motor commission is also where dealer and garage incentives live.
- The rural access question does not resolve itself. The paper justifies near-nil commission on compulsory third-party motor cover sold through institutional channels on the ground that the customer has almost no choice. The same logic applied to loan-linked life cover produces a 2 percent cap on the product that reaches households with debt and no health or life cover of their own. The banks' answer is that the absence of choice is precisely why the product exists at all.
- Grandfathering is the quiet request with the largest number attached. Around 31 lakh individual agents and about 27 lakh registered point-of-sale persons operate in the country, of whom brokers sponsor 14.81 lakh, and online direct business accounts for roughly 2 percent of premium for private life and general insurers. Without transition relief, the first effect is people leaving a profession most of them already combine with other work, and the second is that rural and social sector coverage, which the paper itself lists as an objective, becomes harder to reach.
- For a policyholder, nothing has changed yet. The consultation closes on October 25, the effective date is either January 1 or April 1, 2027, and the market has already priced the paper. What changes if the final rules follow the draft is who is willing to sell you a policy: a lender's tie-up, a bank branch, an agent, or a platform. Fewer willing sellers in a product that most people buy without shopping is the risk worth watching, not the commission number itself.
Action
If you buy insurance through a bank or a lender's tie-up, check now whether the cover is yours or the bank's: ask for the policy in your own name, with your own sum insured and your own nomination, and keep the premium receipt. If your cover is attached to a loan, write down what happens when the loan closes, whether cover continues, for how long and at what premium, because a 2 percent cap plus a ban on bundling is exactly the combination that makes a lender withdraw the product. If you sell insurance, the useful step before October 25 is a written cost model per product line rather than one blended number, because the draft caps differ by product, channel and effort, and the blended view hides where the economics actually sit. Watch three things when the final notification arrives: whether a regulatory impact assessment was published alongside it, whether loan-linked caps land near 2 percent or nearer the 5 percent reported in broker notes, and whether transition relief for existing agents survives.
Watch item: the three full submissions due by October 25, and whether IRDAI answers the reclassification question directly. A paper that cannot separate genuine distributor remuneration from reclassified marketing spend will produce caps that are easy to argue with and hard to defend.