IRDAI is likely to issue a consultation paper on insurance commissions and distribution soon, with banks expected to face significant cuts under the proposed framework, sources told CNBC TV18. The consultation paper is expected to be directional in nature and unlikely to specify exact commission limits, but specific limits are likely to be discussed with the industry by the end of 2026, with proposed changes expected to be implemented from April 2027.

What the proposed framework signals

  • Banks face the largest cuts: Bancassurance partners, which account for about 33% of individual new business premium in life insurance, are expected to see the biggest reduction in commission structures.
  • Individual agents may see smallest cuts: The 49.4% market share held by individual agents in FY25 suggests IRDAI is protecting the agent channel that drives most retail penetration.
  • Credit life products at risk: Commission cuts on credit life insurance, which is sold primarily through banks at the point of loan disbursal, could be significant.
  • Group life insurance may face larger cuts: Group products, where commission structures have historically been more generous, could see bigger reductions.

Context

The consultation paper arrives as IRDAI tightens oversight of the intermediary-led distribution ecosystem. Under the Insurance Intermediaries Amendment Regulations 2026, policy-level tagging and traceability requirements take effect from January 1, 2027. Intermediaries will have to maintain records identifying the individual responsible for solicitation or servicing. The commission reform and the traceability requirements together signal a structural shift toward greater accountability at the point of sale.

Why this matters to you

If you buy insurance through your bank, commission cuts could change what products the bank pushes. Lower commissions reduce the bank incentive to sell high-commission products like credit life and savings plans, which could benefit policyholders if it redirects focus toward products that better match their needs. But it could also mean banks invest less in insurance desks, reducing access in smaller branches. The consultation paper is not yet final; this is the time to watch what IRDAI proposes and how the industry responds.

What to watch

The formal consultation paper will set out specific questions for stakeholders. IRDAI previous consultation on the Public Insurance Registry drew feedback until September 30, 2026. The commission consultation is expected to follow a similar timeline with implementation targeted for April 2027. Policyholders and agents should track the consultation to understand whether product pricing and distribution incentives will change.