26/09/2026
Let’s say you're buying an insurance policy.
The advisor pushes for you to choose Plan A, even though Plan B is the better fit for your family. Why? Well, it pays him 5x more.
That's the problem IRDAI is trying to address via a new framework.
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The regulator has proposed one of the biggest changes to insurance distribution in years, including:
● Caps on commissions
● Restrictions on bundled insurance sales
● Measures aimed at reducing mis-selling
For example, commissions on individual health insurance could be capped at 20% for agents and 15% for distributors. For individual pure term plans, the proposed caps are 30% and 25% respectively.
That's why these proposals have sparked intense debate.
Insurers, banks, brokers, web aggregators and agents could all be affected if selling insurance becomes less profitable. Investors seem concerned too, with shares of insurance distributors like PB Fintech falling.
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But from a family's perspective, the proposals solve a very real problem.
IRDAI says the money being paid to insurance sellers has been growing much faster than the insurance business itself.
Between FY23 and FY25, distributor payouts grew 125%, while business growth was just 28%. As per IRDAI's own numbers, even insurance-mis-selling complaints have risen 14% in 2025, totaling to 26,667.
If these reforms work as intended, families could benefit from:
● Clearer recommendations
● Fewer conflicts of interest
● Less pressure to buy unsuitable products
● Stronger safeguards when purchasing insurance with loans or other products
More importantly, the reforms are designed to push insurers to compete on product quality, service and customer outcomes, not only on how much they pay distributors.
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That said, these are still proposals. The framework is currently open for public feedback until 25 October 2026.
It remains to be seen how the final reforms can actually lead to better outcomes for policyholders.
