Kotak Institutional Equities says IRDAI's September 23 distribution consultation paper would make mis-selling directly expensive: commission clawed back where a sale is established as unsuitable, and customer consent no longer shielding the seller. The note, reported by ANI on September 26, also puts numbers on the incentive problem the draft targets. Across a sample of life corporate agents, new business premium rose from Rs 630 billion to Rs 800 billion between FY2023 and FY2025, while remuneration rose from Rs 96 billion to Rs 216 billion.
What the report adds
- Twelve named illustrations of mis-selling: selling non-participating products in place of bank deposits, unit-linked plans to risk-averse or post-working-age customers, regular-premium products to people without steady income, and life products sold for inheritance planning.
- Suitability becomes documented: a needs and suitability analysis is mandatory for life sales above a defined ticket size, and each policy is tagged to the functional identity of the person who sold it.
- Disclosure above a threshold: commission would be disclosed on policies with cover above Rs 500 million, that is Rs 5 crore, and insurers and large distributors would publish their commission policies on their websites.
- Your own account only: premium must move from the policyholder's own account to the insurer, with third-party payments prohibited except through Bima-ASBA.
- Incentives inside the cap: volume-linked and reward-linked benefits for bank and NBFC staff, including trips and gifts, fall within statutory commission limits.
Why the remuneration gap matters
The FY2023 to FY2025 sample is the clearest statement of the problem so far: remuneration more than doubled while premium grew by about a quarter. That gap is not absorbed by the distributor, it is paid through premium. The draft's answer is structural rather than cosmetic: cap what can be paid, pull indirect payments inside the cap, and take the money back where a sale is later found to be mis-sold.
What it changes for you
- If a savings policy was shown to you as a bank deposit, the draft's own examples treat that as mis-selling, and the commission can be recovered from the seller.
- The seller's record could sit in the public domain, so you can ask who is selling to you and what their record is.
- Policy-level disclosure only reaches cover above Rs 5 crore. For anything smaller, ask the question yourself before you sign.
Action
Comments close on October 25, 2026. If you were sold a deposit-like policy in a bank branch, that experience is exactly what the consultation is soliciting: name the product, the channel and what was said at the sale. And argue for disclosure on every retail policy, not only cover above Rs 5 crore.