Buying a ₹50,000 car insurance policy means up to ₹30,000 often goes to the seller, not coverage. IRDAI just proposed mandatory disclosures and policy tagging, aiming to cut these 40-60% distribution costs. For insurtechs like Acko and Turtlemint, this is the first shot in a potential battle over their core revenue streams.
How We Got Here
Life insurers paid out ₹60,800 Cr in commissions in FY25, an 18% YoY jump, far outpacing 6.7% premium growth. IRDAI's 2023 Expenses of Management (EoM) framework, capping insurer expenses at 30-35% of premium, failed to rein in these high commission levels.
The Numbers
- The current IRDAI consultation paper proposes that intermediaries earning over ₹10 Cr in commissions annually publicly disclose them.
- IRDAI also wants every policy tagged to the individual responsible for its sale, strengthening consumer protection.
- In the non-life segment, 23 insurers were pulled up by IRDAI for overshooting expense limits related to distribution costs.
- Acko General Insurance CEO Animesh Das confirmed insurers "optimised from one source or another" to bypass the 2023 EoM caps.
- Industry executives anticipate tougher reforms including potential commission caps, which would fundamentally alter existing business models.
What Happens Next
🇮🇳 Why This Matters for India
For insurance product managers in Mumbai and Bangalore, these reforms mean re-architecting revenue share and agent incentive structures at scale.
The Take
The immediate losers are legacy brokers and agents who relied on opaque, high commissions, but this will also sting insurtechs built on similar distribution models. Expect direct-to-consumer insurance players to aggressively leverage transparency as a differentiator within the next 6-9 months, forcing an industry-wide price correction.
Source:
Inc42 ↗