Seven in 10 insurance buyers surveyed by LocalCircles support capping commissions paid to agents and distributors, while more than eight in 10 want insurers to disclose the commission payable on a policy before it is purchased. According to LocalCircles, life insurers paid a record Rs60,800 crore in commissions in FY24-25, an 18% increase over the previous year, while total premium growth was below 7%. The non-life insurance industry paid around Rs47,266 crore in commissions during the year, while IRDAI reportedly pulled up 23 insurers for exceeding permissible expense limits.
The findings come as the Insurance Regulatory and Development Authority of India (IRDAI) seeks public comments on its proposed distribution reforms, which include limits on commissions, lower expenses of management (EoM) limits for insurers and a series of measures aimed at curbing mis-selling. The consultation is open until 25 October 2026.
The LocalCircles survey, which received more than 94,000 responses from insurance buyers across 322 districts, found that 86% of respondents said they had not been informed about the commission their agent or distributor would receive from the insurer.
Only 8% said they had been partially informed and 3% said they had been fully informed, while another 3% could not recall whether such information had been provided. The question received 23,690 responses.
The survey also found strong support for making commission disclosure mandatory. As many as 82% of respondents said insurers should disclose the commission being paid to the agent or distributor before the purchase of any insurance policy. Another 6% supported disclosure for life and health policies, taking the total share favouring mandatory disclosure in some form to 88%.
Only 10% opposed such disclosure and 2% were unable to say. The question received 23,003 responses.
IRDAI's 23 September 2026 consultation paper proposes commission limits based on factors such as the insurance segment, line of business, distribution channel, product complexity and the effort involved in selling and servicing the product.
For individual linked and non-linked life insurance products, the proposed commissions range from 5% to 20% for intermediaries and 6.25% to 25% for agents, depending on the premium payment term.
For individual pure-term policies, the proposal provides for first-year commissions of 25% for intermediaries and 30% for agents, with renewal commissions of 7.5% and 10%, respectively. Single-premium savings products would carry commissions of around 1-2%.
In individual health insurance, the proposed first-year commission is around 15% for distribution entities and 20% for agents, with renewal commissions of 5% and 10%, respectively.
For motor insurance, IRDAI has proposed zero commission for distributors on third-party cover and 2.5% for agents and associates. Products sold in underserved areas could qualify for additional rewards beyond the proposed limits.
The regulator has also proposed reducing company-level EoM limits for life insurers to 15% of gross direct premium income within two years and 12.5% within five years, with 10% set out as the long-term goal. For general insurers, the EoM limit is proposed to fall from 30% to 20% over five years.
According to IRDAI, the proposed reduction is intended to bring down the overall cost of insurance and improve returns to policyholders in life savings products.
While IRDAI's consultation paper proposes that insurers and large distributors disclose their commission policies and structures in a simple and accessible manner, policy-level commission disclosure is proposed only for specified commercial policies.
The paper does not propose that the commission payable on an individual's life, health or motor insurance policy be disclosed to the buyer before purchase.
That is where the LocalCircles findings point to a wider consumer demand. Eight in 10 respondents want such disclosure across all insurance policies, which goes beyond the scope of the proposed policy-level disclosure framework.
The survey also raises concerns about the way policies are recommended to consumers. Half of the respondents said insurance agents or distributors had frequently recommended a policy without clearly explaining why it was suitable for them.
Another 24% said this had happened sometimes. Taken together, nearly three in four respondents said they had encountered such recommendations at least occasionally. Only 14% said it happened rarely and 7% said it had never happened. The question received 23,834 responses.
On the central question of commission caps, 71% of respondents said they would support limiting commissions paid to insurance distributors if it helped lower premiums for consumers.
Another 19% said they would support such a move, provided service quality was not affected. Only 8% opposed the measure, while 2% were unsure.
LocalCircles said the findings indicate that 90% of respondents are open to commission caps in some form. The question received 24,082 responses.
The survey results come against the backdrop of a significant increase in commission payouts following IRDAI's 2023 decision to remove most product-level commission caps and give insurers greater flexibility, subject to overall EoM limits.
The proposed reforms extend beyond commission rates. IRDAI has proposed bringing all forms of remuneration, including direct or indirect monetary and non-monetary payments, within the definition of commission.
Other measures include prohibiting the compulsory bundling of insurance with loans, preventing volume- or reward-linked incentives for bank and NBFC employees who sell insurance, linking each policy to the individual salesperson who sold it, publishing information on mis-selling incidents, and clawing back commissions in cases of mis-selling.
The regulator has also proposed mandatory cost audits covering insurer expenses, including intermediary payouts and non-monetary incentives. Distribution entities with insurance-related revenue above Rs100 crore would also be subject to such audits.
The release notes that the reforms follow the enactment of the Sabka Bima, Sabki Raksha (Amendment of Insurance Laws) Act, 2025, which strengthened IRDAI's powers relating to commissions, disclosure and conflicts of interest.
In June 2026, IRDAI floated draft amendments requiring corporate agents, brokers, insurance marketing firms and web aggregators crossing a Rs 10 crore commission threshold to disclose commission income, related-party transactions, profits and dividends annually and publish the information on their websites.
In July, IRDAI's board approved changes requiring the name of the authorised salesperson to appear on insurance documents, including proposals, policies and certificates.
Reserve Bank of India (RBI) has also moved against the bundling of insurance with loans. According to the release, RBI in June 2026 barred such bundling and mandated separate, explicit consent for each product, with the framework taking effect from 1 January 2027.
The commission debate also raises concerns about insurance distribution in segments where premiums are relatively small but servicing and distribution costs can be high.
The LocalCircles release notes that insurers have warned that sharply lower or uniform commissions could make group insurance and credit-life products less commercially viable for banks, NBFCs and microfinance institutions. This could potentially affect coverage among low-income borrowers.
The consultation paper, however, proposes additional rewards for products sold in underserved areas, partly addressing the concern over distribution viability.
LocalCircles said its findings would be submitted to IRDAI as part of the consultation process. It has also called for policy-level commission disclosure to be extended beyond specified commercial policies to all retail insurance products, with the commission payable on each policy disclosed to the buyer both in rupee terms and as a percentage of the premium.
