The proposals are part of the regulator’s September 2026 consultation paper, Recalibrating Economics of Insurance Distribution, Part 1: Distribution Reforms.
They are not final regulations and could change after stakeholder feedback.
For policyholders, the proposed changes could affect how insurance products are presented, compared and sold, as well as the incentives for intermediaries.
More information before buying a policy
IRDAI has proposed that insurers make product features, pricing and quality-related information available in a standard and easy-to-understand format. This would include information such as claims and grievance-redressal performance.
The regulator has also proposed that customers should be able to access such information without being required to first provide personal details. This is aimed at addressing practices that IRDAI describes as “dark patterns” on insurance websites.
Tighter controls on commissions
The consultation paper proposes bringing back specific commission limits, with the proposed limits varying depending on the type of insurance, distribution channel, product complexity and the effort involved in selling and servicing the policy.
IRDAI has also proposed greater disclosure of commission policies and structures by insurers and large distribution entities. For certain commercial policies, commission disclosure would also form part of the policy documentation.
For policyholders, the significance is that the regulator is seeking to reduce the possibility of remuneration becoming the dominant incentive behind product recommendations. However, a lower commission cap does not automatically mean that an insurance premium will fall by the same amount.
Stronger safeguards against mis-selling
IRDAI has proposed making suitability an enforceable obligation. For specified life insurance sales, customer needs and product suitability would have to be documented, creating an audit trail around the recommendation.
The proposals are aimed at addressing practices such as selling products without adequately explaining their features, risks, charges, surrender implications or affordability.
This could be particularly relevant for customers buying long-term life insurance and savings products, where the consequences of an unsuitable purchase may emerge only over a longer period.
Loan-linked insurance could see greater choice
The paper proposes safeguards against compulsory bundling of insurance with loans. The broad approach is that insurance should not simply be made a condition for obtaining a loan, while customers should be able to understand the terms of the loan with and without the insurance component.
This could be relevant where insurance is offered alongside loans by banks and NBFCs, particularly given IRDAI’s concerns around distribution incentives in credit-linked insurance.
Lower distribution and management costs
IRDAI has proposed a phased reduction in Expense of Management (EoM) limits. For life insurers, the proposed company-level limit would move towards 15% within two years and 12.5% within five years. For general insurers, the proposed limit would move towards 20% of domestic gross direct premium income over five years.
The regulator says the objective is to lower the overall cost of insurance, expand the risk pool in general insurance and improve returns to policyholders in life savings products. However, the proposal does not mean that premiums or policy costs will automatically fall by a fixed percentage.
More choice in motor insurance
The proposals could also change how motor insurance is sold at vehicle dealerships. IRDAI has proposed measures to give customers greater access to digital insurance options and prevent dealer-linked arrangements from restricting customer choice.
For new vehicles, the consultation paper proposes a nil commission for distribution entities on mandatory third-party motor insurance, while separate commission limits have been proposed for own-damage cover.
The paper also proposes that customers should not be denied cashless repair merely because they purchased insurance through another channel.
Digital comparison and a public insurance registry
IRDAI has proposed strengthening digital infrastructure, including Bima Sugam and a Public Insurance Registry (PIR). The broader objective is to allow customers to access and compare information on insurers, products and distribution more easily.
The proposed framework also envisages “Know Your Insurer” and “Know Your Distributor” capabilities, which could make information about the entities selling and servicing policies more accessible to customers.
What it means for policyholders
Taken together, the proposals seek to shift insurance distribution towards greater transparency, more informed customer choice and stronger accountability for distributors. The changes could affect the way policies are sold and compared, but their eventual impact on premiums, product pricing and customer experience will depend on the final regulations and how insurers and intermediaries implement them.
For now, policyholders do not need to change existing policies solely because of these proposals. The consultation is still open, and the final framework may differ from what has been proposed.