The pitch behind IRDAI's distribution paper is that cheaper distribution should mean cheaper insurance. The mechanics are not that simple. This piece sets out what actually goes into your premium, what the evidence says about the link between commissions and price, and where a genuine saving could appear.

Method and data basis

Built from the IRDAI consultation paper of September 23, 2026 and the expert discussion on CNBC-TV18 with Thomas Devasia, former Member of Non-Life at IRDAI, and Swami Saran Sharma, founder of Helios Global Solutions (September 24, 2026), plus Moneycontrol and Business Today reporting. Figures used: life insurer commissions of Rs 608 crore-scale payouts rising 18 percent in FY25 against 6.73 percent premium growth; proposed EoM limits of 12.5 percent for life and 20 percent for general insurers over five years; health first-year commission caps at 15 to 20 percent and renewal or porting caps at 5 percent for distribution entities.

What actually sets your premium

  1. Expected claims: the core of the price. In health, hospitalisation costs and medical inflation, estimated earlier this year at around 14 to 15 percent, push premiums up regardless of what a distributor earns.
  2. Expenses of management: salaries, technology, branch and distribution costs. This is the variable the paper targets.
  3. Commission: one component inside expenses, not the whole price.
  4. Taxes and reinsurance: GST changes move price directly and visibly; reinsurance rates move with global loss experience.
  5. Profit and capital: the insurer's margin and the cost of holding capital against the risk.

The evidence on commission versus price

Devasia's observation is the inconvenient one: across no line of business has retail price been visibly modulated by the underlying commission outgo. When GST on health insurance was cut, customers felt it immediately in the invoice; commission changes have not produced that effect. His conclusion is that restricting commissions does not automatically translate into an equivalent retail reduction, and medical inflation can absorb the saving anyway. Sharma adds the distribution math: against gross commission earnings above 30 percent, distributors may keep no more than 5 percent net after their own costs, so even a 10 percent cut in commissions puts real pressure on the sales network.

Where a saving could actually show up

  • Health and term first-year prices, where proposed cuts are deepest and underwriting is simplest.
  • Simpler products: if insurers strip frills to hit EoM limits, the policy gets cheaper and easier to sell at the same time.
  • Marketplace pricing: Bima Sugam is designed to run on a low fee rather than commission, which is the direct cost channel to watch.

What to do as a buyer

Compare total premium across at least three insurers for the same cover and claim history, and read the proposal and customer information sheet rather than the sales deck. Do not switch a policy for a small first-year discount: surrender costs and waiting periods on a new health policy can exceed any saving. The right test after the final rules land is a renewal quote, not a launch offer. The consultation closes on October 25, 2026; watch whether the final framework requires any pass-through disclosure, which would make the claim testable rather than promotional.