The industry has been anxiously awaiting IRDAI’s final decision on the implementation date and modalities of its consultation paper, Recalibrating Economics of Insurance Distribution. Brokers fear that the sweeping proposals including reducing their commissions, if implemented in their present form, could severely squeeze their revenues and undermine the economics of professional insurance broking.
New Delhi: The proposed overhaul of insurance distribution economics by the Insurance Regulatory and Development Authority of India (IRDAI) is beginning to unsettle India’s insurance broking industry, with multinational brokers meeting the Prime Minister’s Office, Finance Minister Nirmala Sitharaman and DFS officials for intervention even as some large players prepare for possible job cuts.
The stakes are particularly high in an industry where business is heavily concentrated, with the top 10 brokers accounting for an estimated 90–95 per cent of the total market. Brokers fear that the sweeping proposals in IRDAI’s consultation paper, Recalibrating Economics of Insurance Distribution, could severely compress revenues, undermine business viability and trigger a major restructuring of the sector.
With the regulator yet to announce the final implementation framework and timeline, the industry is facing growing uncertainty, making this a particularly dark Diwali for insurance brokers.
India’s insurance broking industry, with over 750 members, is bracing for a major shake-up, with growing fears that the proposed changes to distribution economics by the Indian insurance regulator could threaten the survival of several broking firms, trigger job losses and fundamentally alter the intermediary landscape.
The industry has been anxiously awaiting IRDAI’s final decision on the implementation date and modalities of its consultation paper, Recalibrating Economics of Insurance Distribution. Brokers fear that the sweeping proposals including reducing their commissions, if implemented in their present form, could severely squeeze their revenues and undermine the economics of professional insurance broking.
With uncertainty hanging over the industry, brokers have stepped up efforts to persuade IRDAI chairman Ajay Seth to reconsider some of the contentious proposals, particularly those relating to distribution remuneration and commissions.
Couple of leading multinational broking firms have met Prime Minister’s Office (PMO) officials and Finance Minister Nirmala Sitharaman, seeking intervention against the proposed changes.
However, their representations have so far failed to secure any direct relief though Seth of late has assured about a consensus among the stakeholders for implementing any proposals.
While the PMO reportedly referred the matter to the Department of Financial Services (DFS), the Finance Minister asked the brokers to take up their concerns directly with Seth.
“We are carefully examining the concerns being raised, analysing the available evidence and considering the appropriate way forward.Reforms of this nature must be built on consensus. They cannot simply be implemented by issuing another set of regulations. We are reaching out to industry participants, including intermediaries and distributors, to understand their concerns and develop a workable approach.The objective is to protect customer choice while ensuring that distribution remains sustainable,’’Seth had said in a recent event in Mumbai.
“Over the past 40 days, I have met extensively with representatives of the insurance industry, distribution channels and policyholders. We are now at the stage of building consensus,’’ hinted Seth.
Interestingly, even some brokers acknowledge that unethical practices, including excessive commission payouts and their misuse to secure business, have become prevalent among certain market participants.
However, they argue that the entire broking industry should not be made to pay for the excesses of a few players.
“Why should IRDAI punish the entire insurance broking community for offences committed by a few players?” asked an employee of a broking company promoted by a large corporate house.
The uncertainty is already casting a shadow over employment prospects. Some multinational brokers and other large players, which expanded aggressively through acquisitions and recruitment drives and offered attractive compensation packages, are reportedly preparing for a worst-case scenario by considering workforce reductions.
“A lot of CVs are currently floating around in the market, but there are hardly any takers,” said industry sources, indicating the growing anxiety among broking professionals.
The proposed regulatory overhaul was also a dominant talking point at the recently concluded Singapore International Reinsurance Conference (SIRC), where a sizeable contingent of Indian brokers and reinsurance professionals had gathered.
Meanwhile, legal experts at Cyril Amarchand Mangaldas, which had earlier played a key role Regulation Review Committee formed by the General Insurance Council and Life Insurance Council in revamping the regulatory framework, have flagged a fundamental concern with the regulator’s proposals. They have argued that the proposed framework could effectively remove insurance brokers as a separate class of intermediaries, potentially leaving the market without intermediaries specifically entrusted with a fiduciary duty towards customers.
Narendra Kumar Bharindwal, President of the Insurance Brokers Association of India (IBAI), cautioned that excessive compression of distribution remuneration, without adequately recognising the costs of advisory services and claims support, could unintentionally weaken insurance penetration, particularly in underserved markets.
“Sustainable reforms must balance affordability with accessibility, competition, innovation and quality of service. Professional insurance broking is not simply a distribution cost. It is an investment in risk resilience, policyholder confidence and the sustainable growth of India’s insurance industry,” Bharindwal stressed.
The industry is not necessarily opposed to regulatory reforms or greater transparency in distribution practices. Its principal concern is that a uniform approach to remuneration could fail to distinguish between commission-driven selling and the specialised advisory, risk assessment and claims-management services provided by professional brokers, explained Bharindwal.
For an industry that has invested heavily in talent, technology, acquisitions and expansion, the final shape of IRDAI’s proposals could prove decisive. Brokers are now hoping that the regulator will reconsider the contentious provisions and strike a balance between controlling distribution costs and preserving a viable, competitive and customer-focused broking ecosystem.
In a consultation paper floated on Wednesday, the regulator proposed bringing down insurers’ Expenses of Management (EoM) to 12.5% of premium for life insurers and 20% of gross direct premium income (GDPI) for general insurers over five years.
The proposed glide path would bring life insurers’ EoM to 15% in two years and 12.5% in five years, while general insurers would move to 25% and 20%, respectively. EoM includes operating expenses of insurance business including commission, remuneration/brokerage, rewards to the insurance agents, intermediaries and insurance intermediaries.
IRDAI said the existing EoM framework introduced in 2023 has not delivered the intended reduction in distribution costs. It noted that total expenses for private life insurers rose to 20.2% of gross premium in FY26 from 16.5% in FY21, while the ratio for general insurers increased to 32.1% from around 25% in FY19.
