IRDAI Eyes 5-Year Glide Path To Cut EoM Caps To 20% For General Insurers, 12.5% For Life Insurers

The Insurance Regulatory and Development Authority of India (IRDAI) has proposed a five-year glide path to lower the company-level Expenses of Management (EoM) caps for insurers, according to its consultation paper on distribution reforms.

Under the proposed framework, the EoM cap for general insurers could be reduced to 20% of Gross Direct Premium Income (GDPI) from the current 30%.

For life insurers, IRDAI has proposed bringing the EoM cap down to 12.5% of GDPI, replacing the existing product-level caps.

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The regulator has also proposed changes to the way EoM is calculated, along with mandatory cost audits and public disclosure requirements. The measures are aimed at improving transparency and preventing insurers from using alternative structures to circumvent the prescribed limits.

The consultation paper also proposes explicit caps on distributor commissions and rewards.

Under the proposed framework, permissible distributor remuneration would be linked to factors including the complexity of the product, effort required for its sale, distribution architecture and the relevant product or line of business.

IRDAI has proposed that all payments made to distributors be taken into account while determining the applicable cap. This is intended to prevent insurers from bypassing commission limits through separate rewards, incentives or other payments.

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The proposals are part of IRDAI's broader effort to reform insurance distribution and bring greater transparency to insurer expenses and distributor remuneration.

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