The Insurance Regulatory and Development Authority of India (IRDAI) has proposed major changes to the way insurance products are sold and serviced in India. The proposed reforms focus on transparency, customer protection, commissions, digital access and reducing mis-selling.
- What Changes Is IRDAI Proposing?
- Greater Transparency Around Insurance Commissions
- Why Are Commission Disclosures Important?
- New Measures to Reduce Insurance Mis-Selling
- Restrictions on Incentives for Bank and NBFC Employees
- Greater Accountability for Insurance Sellers
- IRDAI Looks at Dark Patterns
- New Safeguards Against Forced Insurance Bundling
- Could These Changes Make Insurance More Affordable?
- More Digital Options for Buying and Managing Insurance
- What Could the New IRDAI Rules Mean for Customers?
IRDAI has released a consultation paper titled “Recalibrating Economics of Insurance Distribution”. The paper looks at how insurance distribution currently works and proposes changes to make the system more competitive, efficient and customer-focused.
If implemented, the proposed IRDAI insurance distribution rules could change how customers interact with insurance agents, intermediaries and digital platforms.
However, these changes are still at the proposal stage. IRDAI has invited comments and suggestions from stakeholders until October 25, 2026.
What Changes Is IRDAI Proposing?
The consultation paper covers several important areas of insurance distribution, including:
- Commission structures
- Insurance distributor expenses
- Mis-selling and customer protection
- Disclosure of commissions
- Digital insurance platforms
- Product bundling
- Distributor accountability
- Market conduct
- Insurance infrastructure
The overall objective is to create a more transparent, competitive and customer-centric insurance distribution system.
Greater Transparency Around Insurance Commissions
One of the key proposals focuses on insurance commissions.
IRDAI has proposed that insurers and large distribution entities disclose their commission policies and structures in a simple and accessible format.
Certain commercial insurance policies could also include information about commissions.
This would give customers greater visibility into the costs associated with distributing an insurance product.
Why Are Commission Disclosures Important?
Customers often compare insurance policies based on premiums, coverage and benefits. However, they may not always know how distributors are compensated.
Greater disclosure could help customers understand the distribution costs associated with a policy and make more informed decisions.
IRDAI is also proposing a more flexible commission framework. Instead of applying the same approach across all products, commission limits could consider factors such as:
- Type of insurance product
- Distribution channel
- Product complexity
- Business segment
- Effort involved in selling the policy
- Cost of servicing customers
New Measures to Reduce Insurance Mis-Selling
Mis-selling is another major area addressed in the consultation paper.
IRDAI has proposed measures that would require greater focus on customer needs and product suitability.
The proposals include documenting customer requirements and bringing different forms of distributor remuneration within the regulatory framework.
This could include both monetary and non-monetary incentives, as well as direct and indirect forms of remuneration.
Restrictions on Incentives for Bank and NBFC Employees
IRDAI has also proposed restrictions on certain incentives provided to employees of banks and NBFCs involved in selling insurance.
The proposal seeks to prohibit volume-based or reward-based incentives linked to insurance sales.
The objective is to reduce situations where sales targets or incentives could influence how insurance products are recommended to customers.
Greater Accountability for Insurance Sellers
Another proposal focuses on identifying the individual responsible for selling an insurance policy.
IRDAI has proposed linking the identity of the seller to the policy sold. It has also suggested making information about certain mis-selling incidents publicly available.
In cases where mis-selling is established, the regulator has proposed the possibility of commission clawback.
These measures could make distributors more accountable for the policies they sell and the advice they provide.
IRDAI Looks at Dark Patterns
The consultation paper also addresses dark patterns, which are design practices that can influence or manipulate consumers when they interact with digital platforms.
IRDAI has proposed tracking such practices and improving the availability of relevant performance information.
The aim is to make digital insurance journeys clearer and reduce practices that could make it difficult for customers to understand their choices.
New Safeguards Against Forced Insurance Bundling
IRDAI has proposed stronger safeguards against compulsory bundling of insurance with other financial products and services.
For example, customers may sometimes be offered insurance alongside another financial product. The proposed framework aims to ensure that customers have greater clarity about the insurance component and are not unnecessarily pushed into purchasing it.
The proposal is part of IRDAI’s wider effort to improve customer choice and reduce mis-selling.
Could These Changes Make Insurance More Affordable?
IRDAI has also proposed changes to the Expense of Management (EOM) framework and distribution costs.
The regulator’s objective is to improve cost efficiency across the insurance sector over time.
Lower structural and distribution costs could potentially support affordability for policyholders. However, it is important to note that these proposals do not automatically mean insurance premiums will fall.
Any impact on premiums would depend on how insurers implement the changes and how costs develop across the industry.
More Digital Options for Buying and Managing Insurance
Digital infrastructure is another major part of the proposed reforms.
IRDAI has proposed the use of Market Infrastructure Institutions (MIIs) as digital, pull-based alternatives for insurance distribution. Bima Sugam has been identified as one such digital infrastructure.
The regulator has also proposed greater use of the Public Insurance Registry (PIR).
These digital systems could help customers with:
- Comparing insurance products
- Buying policies digitally
- Accessing policy information
- Servicing existing policies
- Improving portability
- Reducing paperwork
- Accessing insurance services more conveniently
The broader goal is to make insurance more accessible, particularly for consumers who currently have limited access to insurance services.
What Could the New IRDAI Rules Mean for Customers?
If the proposals are eventually implemented, customers could see changes in several parts of the insurance buying process.
The proposed framework could bring:
- More transparency about distributor commissions
- Better disclosure of insurance-related costs
- Stronger safeguards against mis-selling
- Greater accountability for insurance sellers
- More protection against forced bundling
- More digital options for buying and servicing policies
- Greater access to insurance information
However, the final impact will depend on the rules that IRDAI ultimately adopts after considering stakeholder feedback.
What Happens Next?
The proposals are currently part of a public consultation process. IRDAI has invited stakeholders to submit their comments and suggestions by October 25, 2026.
The regulator will consider the feedback before deciding on the final framework.
Therefore, customers should not treat the proposals as final insurance rules yet. Any changes to the existing system will depend on the final regulations and implementation guidelines issued by IRDAI.
Frequently Asked Questions
What is IRDAI proposing?
IRDAI is proposing changes to insurance distribution rules covering commissions, transparency, mis-selling, digital infrastructure, customer protection and distribution costs.
Will insurance commissions become more transparent?
The proposed framework includes greater disclosure of commission policies and structures, which could give customers more information about distribution costs.
Will forced insurance bundling be stopped?
IRDAI has proposed stronger safeguards against compulsory bundling of insurance with other financial products and services.
Could insurance premiums become cheaper?
The proposed reforms aim to improve cost efficiency, but they do not guarantee lower insurance premiums. The actual impact would depend on how the final rules are implemented.
Are the new IRDAI insurance rules final?
No. These are currently proposals under consultation. Stakeholders have been invited to submit their comments before the final framework is decided.
Bottom Line
IRDAI’s proposed changes could significantly reshape the insurance distribution system in India. The focus is on improving transparency, strengthening customer protection, reducing mis-selling and expanding digital access.
For policyholders, the proposed reforms could make it easier to understand insurance costs, compare products and identify who is responsible for selling a policy.
However, these changes are not final yet. Customers and insurance professionals will need to wait for IRDAI’s final decision after the consultation process is completed.
