The proposed guidelines outline stricter commission caps, including lowering expense limits across a five-year period and dropping credit life commissions from 40% to 2%. Insurers and intermediaries are currently waiting for draft guidelines following a deadline extension for stakeholder input. However, intermediaries have voiced strong opposition to the draft measures, citing risks of major revenue reductions and employment losses. Insurance brokers in particular have warned that their revenues could tumble by 60% if the framework takes effect without changes.
Key points
The regulator aims to link distributor remuneration directly to sales effort, product typ…: The regulator aims to link distributor remuneration directly to sales effort, product type, and distribution channel.
Industry stakeholders anticipate an April 2027 rollout, whereas the regulatory chairman p…: Industry stakeholders anticipate an April 2027 rollout, whereas the regulatory chairman previously signaled preferences for January or April.
The final implementation timeline will only be determined once the authority finishes eva…: The final implementation timeline will only be determined once the authority finishes evaluating the 650-plus submissions.
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The regulator had extended the deadline earlier by a week after receiving more than 650 responses to its September 23 consultation paper, which proposes tighter commission limits, changes to expense-of-management rules and a new distribution architecture. The industry is now awaiting the draft guidelines followed by the final framework.
Both insurers and intermediaries are expecting the new rules to take effect from April 2027, allowing time to prepare for changes to distribution arrangements and business models. IRDAI chairman Ajay Seth had told ET in an interview that he would like the framework to be implemented from either January or April. The final date will be decided after the regulator examines the feedback.
The consultation paper seeks to curb distribution costs and improve transparency by linking remuneration to the nature of products, distribution channels and the effort involved in selling them. It also proposes reducing expense limits over a five-year period. In case of credit life, commission will fall to 2% from the current 40%.
Stakeholders have raised concerns over loss of revenue and jobs following the implementation of the proposed…
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