The Insurance Regulatory and Development Authority of India (IRDAI) has issued an interim consultation paper to introduce stricter disclosure norms for those insurance intermediates who earn over the limit of Rs 10 crore in a year, which broadly outlines a review of the commission structures and disclosure transparency in the insurance distribution ecosystem. The decision follows discussions by the regulator on possible changes to insurance distribution commission, paying out commissions via bancassurance, through insurance brokers and corporate agents.
Key Highlights
- IRDAI proposes enhanced disclosures for intermediaries earning over Rs 10 crore annually.
- New norms aim to improve transparency across insurance distribution and bancassurance networks.
According to industry executives, the proposal reflects a shift in IRDAI's regulatory focus from insurers alone to the wider network of intermediaries that play a growing role in insurance sales across India. These include banks operating as corporate agents, insurance brokers, web aggregators, and bancassurance partners, which have become key distribution channels for life and general insurance products.
The regulator has already been collecting granular data on commission payouts and distribution costs from insurers as part of a broader assessment of how incentives flow through the insurance ecosystem. Industry observers believe the latest disclosure proposal could pave the way for increased transparency around commission earnings and help identify potential distortions in product distribution practices.
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Bancassurance Commissions Under Greater Scrutiny
With banks accounting for a major share of the insurance policy sales in India, the proposed disclosure framework is likely to put bancassurance commissions in the spotlight. As a result of worries about mis-selling, expensive acquisitions, and potential conflicts of interest from commission-based distribution arrangements, regulatory attention has been focused on such matters.
Experts in the field say better disclosures would increase transparency in the commission model used in various distribution channels and help policyholders understand better. It also follows IRDAI's overall initiative to enhance the governance, accountability and protection of insurance consumers.
This proposal comes after a number of new regulatory developments, such as a call by the FSA for insurers to provide detailed information about commissions and greater scrutiny of the remuneration practices of insurance companies. The regulator is slowly preparing the path for a complete revamp of commission structures, analysts believe, while trying to meet the needs of growth and policyholders.
With insurance penetration steadily increasing in India, if regulations are changed regarding commission disclosure or distribution economics, it can have a major impact on the insurance companies, banks, brokers and insurance intermediaries, which will affect the sales and distribution of insurance products in the near future.
