IRDAI is developing a commission framework that links intermediary compensation to two key metrics: product complexity and policy retention. Under the proposed structure, simpler products like term insurance and health policies would attract higher commission rates, while complex traditional endowment and ULIP products would face lower commission caps.
The retention linkage means agents earn bonus commissions only when policies remain active beyond specific milestones - 5 years, 10 years, and 15 years. Products with first-year surrender rates above 30% would face automatic commission reductions.
IRDAI data shows that 39% of life insurance benefits paid in FY26 were through premature surrenders, up from 32% five years ago, indicating widespread mis-selling. The framework is expected to be finalised by December 2026 with implementation from April 2027.