India plans insurance commission overhaul to reduce mis-selling and improve consumer protection

Friday 03 July 2026 - 08:01

By: Sahili Aya

India plans insurance commission overhaul to reduce mis-selling and improve consumer protection

India's insurance regulator is preparing a major overhaul of commission structures for insurance distributors, aiming to curb policy mis-selling, lower distribution costs and strengthen consumer protection in one of Asia's largest insurance markets.

According to sources familiar with the discussions, the Insurance Regulatory and Development Authority of India (IRDAI) is considering replacing large upfront commission payments with a model that compensates distributors over the entire life of an insurance policy.

Shift away from upfront commissions

The proposed reform would fundamentally change how insurance agents and distributors are paid.

Instead of receiving substantial commissions when a policy is sold, distributors would earn compensation gradually throughout the policy's duration. The approach is intended to better align incentives with long-term customer service and policy retention.

The regulator is also examining ways to link remuneration more closely to both the effort involved in selling insurance products and the quality of after-sales support provided to policyholders.

Tackling policy mis-selling

According to industry sources, the current commission model has contributed to cases of mis-selling and high policy turnover, with some distributors prioritizing immediate commissions over customer suitability.

By spreading payments over time, regulators hope to encourage distributors to recommend products that better match customers' financial needs while reducing incentives to replace existing policies unnecessarily.

The proposed changes also aim to improve confidence in the insurance sector by promoting more sustainable sales practices.

Reducing costs in a fast-growing market

The commission review forms part of a broader regulatory assessment of India's insurance industry.

IRDAI is seeking to reduce the high costs associated with policy distribution while supporting the long-term development of the sector.

Although India is one of Asia's largest and fastest-growing insurance markets, insurance penetration remains relatively low compared with many other major economies, leaving significant potential for future expansion.

Industry consultations continue

The proposals remain under discussion between the regulator and industry participants, and no final framework has yet been announced.

If adopted, the reforms would represent one of the most significant changes to India's insurance distribution model in recent years, potentially reshaping incentives for agents while strengthening consumer protection across the sector.