Mumbai, September 25, 2025 — Ajay Seth, the newly appointed Chairman of the Insurance Regulatory and Development Authority of India (IRDAI), has called for a reassessment of distributor commissions in the insurance sector. In his first industry-level interaction with managing directors and chief executive officers of leading insurance companies, Seth expressed concern over the high commissions paid to agents and intermediaries, which he believes are contributing to inflated premium costs for policyholders.
The meeting, held on September 17, focused on several key issues including increasing insurance penetration, faster settlement of health insurance claims, and fulfilling rural and social sector obligations. However, the spotlight remained on the commission structure, which Seth suggested should be aligned more closely with the mutual fund distribution model. Industry officials confirmed that IRDAI is considering the formation of a panel to explore cost-reduction strategies and improve transparency.
Currently, insurers pay commissions ranging from 15% to as high as 45% of the first-year premium to distributors. In motor insurance, commissions can reach up to 57% for new private auto contracts. These figures have raised concerns about the affordability of health and motor insurance, especially as medical inflation continues to rise at an annual rate of 10–12%.
Seth’s proposal includes the possibility of disclosing commission details on policy documents to enhance transparency. Insurers are also expected to submit a presentation on adopting a Total Expense Ratio (TER) framework, similar to that used in mutual funds, which typically limits distributor commissions to between 0.05% and 2% of the scheme’s assets under management.
The IRDAI has previously relaxed fixed caps on commission payouts, replacing them with an overall cap on the total expenses of management. However, reports suggest that insurers have used this flexibility to increase commissions rather than reduce operating costs, resulting in higher premiums for consumers.
The Chairman’s remarks signal a renewed regulatory push to ensure that cost efficiencies benefit policyholders rather than intermediaries. The industry awaits further directives as IRDAI continues its efforts to make insurance more accessible and affordable across India.
