The Insurance Brokers Association of India (IBAI) has formally asked the Insurance Regulatory and Development Authority of India (IRDAI) to extend the feedback deadline on its insurance distribution consultation paper from October 25 to December. At a press interaction on Tuesday, IBAI President Narendra Bharindwal stated the association needs more time to examine the proposals and submit its views. This pushback comes just two weeks after the regulator released the paper, 'Recalibrating Economics of Insurance Distribution,' on September 23.
The core of the dispute lies in the proposed changes to commission structures and insurers’ overall Expense of Management (EoM) limits. Bharindwal argued that the reforms are misdirected, stating, “The opportunity before us is not reducing costs but improving outcomes of insurance.” He emphasized that policyholder choice is paramount and questioned whether any savings from lower distribution costs would actually translate into lower premiums for customers. In a separate representation to Finance Minister Nirmala Sitharaman on October 2, IBAI noted the absence of a mechanism to ensure such cost savings benefit the end consumer.
IBAI supports measures targeting genuine mis-selling, such as prohibiting compulsory bundling of insurance with loans and strengthening suitability requirements. However, the association has raised significant concerns over proposed commission caps across products and distribution channels. Bharindwal warned that these changes could disrupt the wider distribution network. He argued that the current EoM framework, introduced in 2023, removed earlier product-level commission sub-caps and gave insurers greater flexibility in determining operating and distribution expenses, subject to overall limits.
The association is seeking the continuation of the 2023 EoM framework until its scheduled review in 2028. IBAI argues that reintroducing detailed commission sub-caps based on product, distribution channel, and nature of business could encourage alternative payment arrangements and recreate compliance issues that existed before the 2023 reforms. The livelihood impact is substantial; citing IRDAI data, IBAI noted that insurance distribution supports more than 83 lakh professionals, including agents and point-of-sale persons. The association estimates that at least 10 lakh livelihoods could be at risk over a five-year transition period if the proposed changes are implemented, though it described this as a preliminary estimate.
IBAI has also sought a published impact assessment covering policyholders, employment, public-sector insurers, and foreign investment before any new regulation on commissions or expense limits is notified. The association has requested that the Department of Financial Services convene IRDAI, insurance councils, LIC, GIC Re, and IBAI before any draft regulation is issued. This move signals a potential regulatory standoff, with industry bodies prioritizing structural stability and employment preservation over immediate cost reductions in the distribution model.