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The regulator has proposed a significant recalibration of insurers cost structures

ICICIdirect Research 24 Sep 2026 DISCLAIMER

News: As per IRDAI’s consultation paper, the regulator has proposed a significant recalibration of insurers’ cost structures through product- and channel-specific commission caps alongside lower Expenses of Management (EoM) limits. For life insurers, EoM is proposed to decline to 15% of premium within two years and 12.5% within five years. For life policies with premium-payment terms of ≥10 years, first-year commissions are proposed to be capped at 20% for distribution entities and 25% for individual agents, declining for shorter-duration products. Individual health commissions are proposed at 15%/20% for distribution entities/agents in the first year and 5%/10% on renewals, while loan-linked insurance would face materially lower caps of ~5% for select products. IRDAI has sought feedback until October 25.

View: The proposed commission caps should be structurally favourable for insurers, as lower distributor payouts would reduce acquisition costs and support VNB margins. While softer distributor incentives could moderate new business growth, we expect the margin benefit to outweigh the potential impact on APE growth, subject to the final framework. The impact should be more pronounced for bancassurance-heavy insurers, while banks could see pressure on insurance distribution fee income.

Impact: Neutral

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