Now Reading: Irdai commission cap plan may hit low-income life covers
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Irdai commission cap plan may hit low-income life covers
The insurance regulator Irdai is considering an effort-based commission framework that would rank distributors by the selling and servicing effort they put in. Individual agents would top the hierarchy, while OEM channels…
The Story in Brief
The insurance regulator Irdai is considering an effort-based commission framework that would rank distributors by the selling and servicing effort they put in. Individual agents would top the hierarchy, while OEM channels like auto dealers and web aggregators would face the lowest commission caps. The Times of India reports that life insurers fear this could make low-premium products unviable, especially group credit-life covers sold through banks, NBFCs and microfinance institutions to low-income borrowers.
Corporate agents and brokers accounted for over Rs 61,000 crore or about 60% of private insurers' new business premium in FY25. Industry officials warn that if commissions fall below a viable level, distribution of credit protection covers may decline, undermining the government's 'Insurance for All by 2047' goal. India's life insurance penetration stands at just 2.7% of GDP.
The Indian Opinion
The effort-based commission model sounds logical, reward genuine selling, not just placement. But Irdai’s worry about mis-selling through institutional channels is balanced against the reality that 60% of private insurers’ new premium comes from corporate agents and brokers. A blunt cap that makes low-premium group credit-life unviable will hurt the very low-income borrowers the regulator wants to protect. The test will be whether Irdai calibrates caps by product type, not just distribution effort, when it releases the hierarchy.
Source: timesofindia.indiatimes.com
This story was synthesised by AI from the source linked above.
