Heavy Intermediary Commissions Inflate India’s General Insurance Costs: Praxis Global

A new report by management consulting firm Praxis Global Alliance highlights that the general insurance industry in India remains burdened by structurally high expense ratios. The primary culprit is an over-reliance on intermediary-led distribution models, which keeps the cost of acquiring and maintaining customers stubbornly elevated.

The report notes that intense competition among insurance providers to secure intermediary mindshare and wallet share prevents commission payouts from naturally cooling down.

The Renewal Trap: Why Costs Don’t Drop over Time

In a mature insurance landscape, the cost of retaining an existing customer is supposed to be significantly lower than acquiring a new one. However, the current Indian ecosystem breaks this economic norm:

• Acquisition Mimicry: While there is a 15–20% differential between commissions for new and renewal business, renewal economics remain heavily weighed down by fresh commissions and acquisition-like administrative expenses.

• The Lifetime Value Bottleneck: Because each renewal behaves like a brand-new acquisition from a cost perspective, insurance companies fail to compound financial gains across multiple policy cycles. The true Customer Lifetime Value (LTV) accumulates at the intermediary level rather than staying with the insurer.

The D2C Contrast: Direct-to-Consumer (D2C) channels present the exact opposite financial dynamic. While upfront marketing and digital acquisition costs might be higher initially, the near-zero cost of subsequent renewals unlocks far superior long-term compounding and customer profitability.

Industry Segments: Who Pays the Most?

The intensity of commission payouts varies significantly across the different categories of insurers operating in the market: