In an open letter to IRDAI chairman and members of the authority dated September 29, Jha said he supported the regulator’s stated objectives of lowering costs for customers, making remuneration more transparent and expanding insurance coverage.
He questioned the process and the likely impact of the proposals on distributors, lenders, employees, investors and policyholders.
IRDAI published its consultation paper, “Recalibrating Economics of Insurance Distribution”, on September 23. The consultation is open until October 25.
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The regulator has argued that distribution costs have risen faster than insurance business in several segments.
The consultation paper proposes changes to commissions, insurers’ Expenses of Management and incentives.
Coverfox questions IRDAI’s expense data
Jha’s letter cites IRDAI data showing that private life insurers’ total expense ratio rose from 16.5% in FY21 to 20.2% in FY26, while that of private general insurers increased from about 25% in FY19 to 32.1% in FY26.
He argues that the numbers need to be read alongside changes in accounting and regulatory treatment.
According to Jha, some distribution payouts were reclassified as commission after the 2023 reforms.
He also points to the loss of input tax credit after individual life and health insurance premiums became GST-exempt in September 2025.
“How much of the rise in total expenses is genuine additional cost, and how much reflects reclassification, the loss of input tax credit and accounting changes?” Jha asked in the letter.
2% cap on loan-linked insurance
The sharpest objection in Jha’s letter is directed at the proposed 2% commission limit for loan-linked protection.
Jha argues that credit-linked insurance reaches borrowers through lenders and can be particularly relevant for lower-income and rural households that do not typically shop for insurance independently.
He cites NABARD’s NAFIS 2021-22 survey, which found that 52% of rural households had outstanding debt, compared with 24% holding life insurance, according to the figures cited in his letter.
The Coverfox founder says lenders and their distribution networks have spent decades building the infrastructure through which credit and insurance reach these borrowers.
He also disputes the suggestion that the higher commissions seen in recent years necessarily represent a new cost. Jha says commissions on group credit life had historically been around 30%, but some payments had earlier been classified as marketing and advertising expenses rather than commission.
His concern is that a 2% cap could make it uneconomic for lenders and intermediaries to continue offering the cover.
“Who will enrol and service a rural borrower for ₹20, and at what quality?” Jha asked.
He also asks whether borrowers who currently receive insurance through lenders would continue to be covered if lenders stopped offering the product.
Brokers join the pushback
The Insurance Brokers Association of India (IBAI), which represents 798 licensed insurance brokers, has also raised concerns over the consultation paper.
IBAI said it supports several measures proposed by IRDAI, including a ban on forced bundling of insurance with loans, suitability obligations, clawbacks for mis-selling and greater transparency around related-party transactions.
Its main objection is to the proposed commission caps across products and distribution channels and the proposed reduction in insurers’ overall expense limits.
IBAI said the proposed framework could affect the economics of broking, particularly for point-of-sale persons operating in smaller towns.
According to the association, brokers sponsor 14.81 lakh of India’s 27.18 lakh point-of-sale persons, many of them self-employed.
The association argued that commission caps below the cost of servicing customers could reduce the number of people selling insurance, while lower expense limits could force insurers to cut staffing and other costs.
IBAI also disputed the way some of the commission data is presented in the consultation paper. It said the paper relies in some instances on outlying commission and margin figures that do not represent industry averages, while acknowledging that excessive remuneration in segments where customers have limited choice should be addressed.
The association further said that the 2023 framework had already brought down the total expenses of general insurers from 28.2% to 26.5% of premium, and argued that part of the apparent increase in commissions reflects reclassification.
IBAI has said it will ask IRDAI to retain the 2023 framework, limit commission caps to segments where customers have little choice, consider premium refunds where applicable and exempt commercial risks. It also wants an impact assessment before draft regulations are prepared.
The association plans to submit its detailed response by October 25.
Turtlemint IPO raises regulatory timing questions
Jha has also questioned the timing of IRDAI’s proposals in relation to recent fund-raising and licensing activity in the insurance sector.
He points to the June listing of Turtlemint Fintech Solutions, which raised ₹882.67 crore through its IPO at ₹152 a share.
Turtlemint’s shares fell to ₹109.10 on September 24, according to Jha’s letter. PB Fintech also saw a sharp fall in its share price around the same period. Jha cites the market reaction while questioning whether IRDAI had been aware of the proposed changes when the regulatory framework underpinning the IPO was in place.
“Did the Authority have the knowledge of the Consultation Paper at the time of granting approval for the IPO?” he asks.
The question comes as IRDAI has also been opening up the insurance market to new players. The regulator granted its fourth new insurer licence of 2026 in July and has moved intermediaries to perpetual registration, subject to the applicable requirements.
Jha says frequent changes soon after licences are granted or companies raise money from public investors can create uncertainty for investors.
Coverfox seeks impact assessment
Jha has also criticised the consultation process. He points out that the current paper does not contain draft regulation text or specify whether the proposals would eventually be issued as regulations or circulars. He contrasts this with the process followed for the 2023 Expenses of Management framework, when IRDAI published an exposure draft and invited comments before notifying the final regulations.
He wants IRDAI to publish an impact assessment covering policyholders, insurance distribution jobs and capital deployed in the sector.
The letter cites roughly 27 lakh registered point-of-sale persons, with nearly 15 lakh engaged through brokers. Jha argues that reducing remuneration could affect the economics of this workforce.
Distribution remains heavily dependent on people
Jha’s argument rests partly on the current structure of insurance sales in India.
The Coverfox letter cites IRDAI’s consultation paper to say online direct business accounts for about 2% of premium for private life and general insurers.
India has around 31 lakh individual agents and about 27 lakh registered point-of-sale persons, according to the figures cited by Jha. He argues that cutting remuneration while the industry is trying to expand its distribution network could make it harder to reach customers in smaller towns and rural areas.
IRDAI, meanwhile, is seeking to reduce costs and improve transparency in the distribution chain. Its proposals include changes to commission structures, expense limits and incentives, alongside greater accountability for sellers.
Five suggestions from Coverfox
Jha has proposed five broad changes instead of simply reducing distributor remuneration.
They include creating a “Priority Sector Insurance” framework for underserved customers, allowing established distributors to eventually move into insurance manufacturing subject to regulatory conditions, expanding the use of digital infrastructure, regulating the overall cost of distribution rather than individual expense heads, and adopting a more formal impact-assessment process for major regulatory changes.
He has also asked IRDAI to publish the number of policyholders and distributor jobs that could be affected by the proposed changes.
The consultation process remains open until October 25. The proposals are not final regulations and could change after stakeholder feedback.
Jha has offered to debate the proposals publicly with the drafters of the consultation paper and the IRDAI chairman.
“None of this is an argument against reform,” Jha said in the letter. “It is an argument on Accountability and Trust that we have on a Regulator.”
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