Helios Global CEO Swami Saran Sharma said IRDAI’s latest consultation paper could squeeze distribution margins in Tier‑3 and Tier‑4 markets—making the cost‑to‑volume equation less favorable for insurers.
The paper proposes lower expense‑of‑management limits and tighter commission caps, but it does not specify the new thresholds. Sharma noted insurers will still need to maintain agent networks in smaller towns, and that higher operating costs in these markets could render the expansion unviable.
When insurers expand into Tier‑3 cities, commissions typically account for 12% of premium revenue, whereas in Tier‑4 markets the figure can climb to 18% due to lower volumes. The proposed cuts could reduce these percentages by an estimated 3‑5%, a move that would shift the profitability equation for many carriers.
Industry observers point out that premium volumes in personal lines are already thin, and that a 3% commission reduction might be absorbed by insurers through higher pricing or tighter underwriting. In commercial lines, however, the impact could be more pronounced, as competition is already intense and margins are thin.
IRDAI is expected to finalize the consultation paper by the end of Q3 2026. The insurance sector will likely reassess distribution strategies once the new cap figures are released, potentially accelerating a shift toward digital and direct sales models.