The Insurance Brokers Association of India (IBAI)—representing 798 licensed insurance brokers—has cautioned that the Insurance Regulatory and Development Authority of India’s (IRDAI) newly proposed insurance distribution reforms could trigger job losses and restrict insurance access, particularly in smaller towns and cities.
The warning follows IRDAI’s release of a consultation paper proposing tighter Expense of Management (EoM) limits for insurers and lower commission caps for intermediaries.
Key Concerns Raised by IBAI:
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Job Losses & Operational Cutbacks: IBAI noted that a mandated reduction of over 30% in overall expense limits across five years cannot be met through efficiency gains alone, likely forcing insurers and intermediaries to cut sales, servicing, and claims personnel.
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Impact on Smaller Towns: Commission caps falling below the actual cost of servicing customers could discourage insurers and brokers from expanding into Tier-2 and Tier-3 cities, undermining India’s goal of achieving “Insurance for All by 2047.”
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Weakening Independent Brokers: The proposed rules introduce over 30 separate product- and channel-specific commission caps. IBAI warns this could result in independent brokers receiving lower remuneration than tied agents, reducing their ability to help customers compare policies, negotiate coverage, and manage claims.
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Broader Industry Repercussions: The association also pointed out that regulatory stability is crucial at a time when the government has opened the sector to 100% foreign direct investment (FDI).
IBAI’s Recommendations to IRDAI:
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Retain the existing 2023 EoM framework while tightening calculation rules if necessary.
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Limit commission caps strictly to credit-linked and coerced-choice sales.
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Exempt commercial and large risks from the proposed caps.
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Conduct a thorough regulatory impact assessment before drafting final regulations.
