IBAI flags job, growth risks from IRDAI’s proposed distribution reforms

The Insurance Brokers Association of India (IBAI) has raised concerns over IRDAI’s proposed changes to insurance distribution, saying the framework could reduce distribution reach, increase job losses and slow insurance growth.

IBAI, in a statement, said it supports measures in IRDAI’s consultation paper, including a ban on compulsory bundling of insurance with loans, suitability requirements, commission claw-backs for proven mis-selling and greater transparency on related-party payments. However, the association opposed the proposal for more than 30 commission caps based on product and distribution channel, along with the proposed reduction in insurers’ overall expense limit.

IBAI said the proposed caps could make it uneconomical for intermediaries to serve customers in smaller towns. As of March 2025, insurance brokers sponsored 14.81 lakh of the country’s 27.18 lakh point-of-sale persons and 16,230 of 26,316 motor insurance service providers.


The association also said insurers could be forced to cut sales, servicing and claims staff if the expense limit is reduced by more than 30% over five years.

IBAI cited IRDAI data showing that 69% of complaints against general insurers relate to claims and 63% of complaints on its portal are decided in favour of customers.

The association said general insurers’ expenses had declined from 28.2% of premium in FY23 to 26.5% in FY25, while premium grew by about 13% annually. It said the reported increase in commissions was partly due to reclassification of payments under different heads.

IBAI has urged IRDAI to retain the 2023 expense-of-management framework, restrict commission caps to credit-linked and other coerced-choice sales, exempt commercial and large risks, and publish a regulatory impact assessment before drafting regulations.

The association said it will submit its detailed response to IRDAI by October 25.