The Insurance Regulatory and Development Authority of India has proposed overhauling commission rules to cap payouts, link them to product complexity and spread life insurers' commissions beyond a policy's first year.
The proposals were included in IRDA's discussion paper released on Wednesday. They are part of the authority's push to reform the sector after India this year opened it to 100% foreign ownership, and target costs it says have ballooned since commission limits were scrapped in 2023.
The paper proposes linking commission levels to complexity of products and effort required to sell.
It prescribes lower commissions for products sold via an "open architecture" such as through brokers and banks, which are large channels of sales for health, motor and life insurance.
Mandatory insurance covers such as third-party motor policies would earn little or no commission.
Commissions for banks and lenders selling insurance alongside loans are proposed to be capped at 2% to 5% depending on the product.
Compulsory bundling of insurance with credit would be banned.
Commissions on health insurance are proposed to be capped between 15% and 20% for distributors for the first time when insurance is taken. Commissions on renewal and porting of insurance to a different insurer have been capped at a lower level of 5% to 10%.
Commissions on motor insurance will be capped at 5% to 10% for personal accident cover, the regulator proposed.
For life insurance, the first-year commission has been capped at between 5% and 20% for distributors depending on the tenor of the policy.
The regulator has sought feedback until October 25 before finalising the proposals.
