IRDAI Proposes Strict Disclosures for Insurance Intermediaries Earning Over 10 Crore in Commissions

The Insurance Regulatory and Development Authority of India (IRDAI) has released a consultation paper proposing enhanced disclosure norms for insurance intermediaries that earn more than Rs 10 crore in commission in a financial year. These entities must annually disclose details of the commission earned, related party transactions, profits, and dividend repatriated. The disclosures must be submitted to IRDAI and also published on the company's website. This marks the first time the regulator has sought such detailed public disclosures from insurance intermediaries, aiming to strengthen transparency and accountability while easing compliance requirements.

Commission expenses constitute a major share of insurance brokers' total expenses. According to IRDAI's latest annual report, life insurers paid out commissions of Rs 60,800 crore during 2024-25, an 18% year-on-year increase, while total premium grew by under 7% over the same period. The non-life insurance industry paid Rs 47,266 crore in commission in 2024-25, and IRDAI pulled up 23 insurers for exceeding expense limits. These figures highlight the significant financial impact of commissions on the insurance sector and the need for regulatory oversight.

The consultation paper comes amid reports that IRDAI will release an insurance distribution reform paper aimed at capping commissions payable to agents and intermediaries. Under the IRDAI Expenses of Management Regulations 2023, insurers can incur expenses in the range of 30-35% of gross written premium. However, this cap continued to permit relatively high commission payouts. A case in point is insurance distribution company Turtlemint, which earned Rs 369.7 crore from "marketing fees" in FY23, accounting for 88% of its total revenue. When IRDAI revised commission regulations in FY23, its total revenue fell to Rs 78.6 crore in FY24.

PB Fintech Group CEO Yashish Dahiya recently told The Economic Times that if IRDAI introduces commission caps, it would pose an existential threat to insurance distributors and disrupt the company's business. This underscores the sensitivity of the industry to regulatory changes. Other key proposals under the exposure draft include a shift from recurring renewals to a perpetual registration framework for insurance brokers, reducing compliance burden by eliminating certain certification requirements, and enhancing accountability by tagging each policy to the individual responsible for the sale.

Additionally, the amendments mandate the use of the words "Insurance" or "Assurance" in company names and require insurance distributors to collect Aadhaar/PAN and personal details of salespersons for consumer protection. IRDAI may impose conditions, restrictions, or limits on the business of insurance intermediaries to safeguard policyholders' interests and ensure orderly growth. These proposals aim to create a more transparent and accountable insurance distribution ecosystem in India.