India’s insurance regulator is weighing a shift to an “effort-based” commission framework that would tie intermediary payouts more closely to the intensity of work involved in originating and servicing policies, according to people familiar with the discussions.

Regulator reassesses how distributors are paid

The Insurance Regulatory and Development Authority of India (IRDAI) is reviewing commission rules across distribution channels with the aim of differentiating between high‑touch agency operations and lower‑touch models such as web aggregators and some bancassurance arrangements, the people told CNBC-TV18. Under the approach being examined, traditional agents involved in prospecting, onboarding, advice, and post‑sale servicing could qualify for comparatively higher commission allowances, reflecting their greater involvement per policy. By contrast, channels that rely more on digital interfaces or bank branches with relatively lower engagement may see tighter commission structures under the same framework.

The initiative sits within a broader reworking of distribution regulations that IRDAI has been developing. A consultation paper laying out the proposals is expected to be published by the end of May, giving insurers, intermediaries, and other stakeholders an opportunity to respond before rules are finalised. Key elements likely to feature in the consultation include a fresh look at norms for agency and bancassurance models and a reassessment of overall caps on commissions and expenses of management. The regulator’s review comes amid concern that customer acquisition costs are growing faster than premiums, limiting progress in insurance penetration and putting pressure on pricing.

Industry data indicate that commissions have been rising more quickly than premium income, drawing closer regulatory attention to remuneration structures. Under the existing framework, IRDAI can set limits on commissions and other payments to agents and intermediaries with the stated objective of improving transparency and protecting policyholders. In 2023, IRDAI moved from product‑wise commission caps to a more flexible, expenses‑based regime that gave insurers greater discretion in how they allocate commissions and other selling costs within an overall ceiling. Since then, an uptick in expenses and reports of high payouts in some segments have triggered discussion on whether incentives are aligned with long‑term customer outcomes. Market participants say that, if adopted, an effort‑linked model could influence how insurers balance agency, bancassurance, broker, and digital channels and may prompt changes to product design and servicing models in both life and non‑life portfolios.

Swiss Re forecasts India to lead premium growth among major markets

IRDAI’s review comes at a time when external forecasts indicate that India’s premium growth will be higher than that of other large insurance markets over the medium term. Swiss Re, in its report “India’s economic and insurance market outlook 2026-2030: resilient and rising amid global shifts,” projects real insurance premium growth of 6.9% per year between 2026 and 2030, the highest among major markets covered in the study.

According to the report, India’s real GDP is expected to expand by about 6.5% per year on average over the next five years, supported by domestic consumption and continued public capital expenditure. Policy steps such as simplifying goods and services tax (GST) rates and providing personal income tax relief are seen as supporting demand from lower‑ and middle‑income households. The analysis notes that exports of goods to the US account for only around 2% of India’s GDP, implying that direct growth risks from US trade measures are limited. The report also points to monetary and fiscal policies as factors that could help moderate the impact of external shocks.

Life and non-life segments amid ongoing reforms

Swiss Re estimates that India’s insurance market will grow by 3.1% in real terms in 2025 as the sector continues to absorb recent regulatory changes, before growth accelerates to 6.9% a year over 2026-2030. The reinsurer links this shift to reforms by IRDAI and broader government initiatives, including higher foreign direct investment limits in insurance, changes to GST, and efforts to modernise distribution.

In life insurance, where India is already the second‑largest emerging‑market life sector by premium volume, the study forecasts real annual growth of 6.8% over the next five years. Contributing factors include the expansion of agency, bancassurance and digital networks, growing demand for retirement and protection solutions, and rising credit penetration that supports credit‑linked covers. The non‑life segment is expected to face near‑term pressure from regulatory adjustments and medical inflation but is projected to return to higher growth rates over the medium term. Health insurance premiums are forecast to increase by an average of 7.2% per year between 2026 and 2030, while motor insurance is projected to grow by 7.5% annually, supported by increasing vehicle ownership.