IRDAI Weighs More Time On Distribution Reforms As Brokers Seek Extension, Fair Pay: Sources

The Insurance Regulatory and Development Authority of India is open to extending the deadline for feedback on its consultation paper on distribution reforms, NDTV Profit learnt from sources on Thursday.

The regulator is open to considering stakeholder requests for an extension, and may grant one selectively to market intermediaries, the sources said. No decision has been taken yet. The regulator is currently absorbing the feedback it has received.

Stakeholders have until Oct. 25 to submit their comments. The reforms are proposed to take effect from Jan. 1, 2027.

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The proposals, set out in IRDAI's Sept. 23 consultation paper ‘Recalibrating Economics of Insurance Distribution', seek to overhaul how insurance is sold in India. They include product- and channel-specific caps on distributor commissions, a phased cut in insurers' expense of management limits, and a simpler three-tier distribution structure. The paper also proposes a clawback mechanism in mis-selling cases.

Shares of several insurance brokers were hammered after the paper was released, with PB Fintech, the parent of Policybazaar, crashing 36% in a single session.

The Insurance Brokers Association of India sought an extension and met the IRDAI leadership last week to raise its concerns, according to the sources. These included the impact on brokers' livelihoods, curbs on distribution, and expense management.

Brokers are seeking sustainable compensation under the new distribution framework. They have cautioned that lower commissions could weaken distribution incentives in some segments.

Bancassurance players have raised similar concerns. They say the proposed commission caps may not reflect the costs of servicing and compliance.

IRDAI wants adequate representation from all sections of the market before it finalises the framework, the sources said. The regulator is keen on swift implementation but remains sensitive to market concerns, they added.

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Last week, IRDAI Chairman Ajay Seth said that the insurance regulator is open to considering changes based on the feedback received from stakeholders, including a phased implementation of commission-related measures.

Speaking to reporters at Samvaad 2026 India Open Finance Summit on Oct. 15, Seth said the regulator does not intend to disrupt the livelihoods of insurance agents or existing business models. It is also considering concerns raised by smaller insurers, distributors and stakeholders involved in low-ticket insurance policies.

Seth noted that the regulator has received no concerns that the proposed changes would adversely affect foreign direct investment (FDI) in the insurance sector, with foreign investor interest in both life and general insurance remaining strong.

The IRDAI chief had also said insurance policy details could be integrated into consolidated account statements, while the risk-based capital framework remains on track for implementation from April 1, 2027.

The consultations come amid concerns raised by insurance intermediaries over the IRDAI's Sept. 23 consultation paper. The IBAI had written to Prime Minister Narendra Modi seeking intervention and requested a meeting with the regulator before the October 25 deadline for stakeholder feedback.

IBAI urged IRDAI to retain the existing 2023 Expense of Management framework until its scheduled review in 2028, opposed hard caps on commissions and called for a published assessment of the proposals' likely impact.

The association warned that the proposed changes could affect intermediary livelihoods, competition and insurance penetration, while questioning whether lower distribution costs would necessarily translate into benefits for policyholders.

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