Brokers Say IRDAI's Overhaul Could Cost Them 70% Of Revenue

The Insurance Brokers Association of India has warned that IRDAI's proposed distribution reforms could cut broking revenues by 60 to 70 per cent and put at least 10 lakh jobs at risk over five years.

Speaking at a briefing in Mumbai on 6 October, IBAI president Narendra Bharindwal said the proposals could lower broker revenues by nearly 70 per cent. The association, which represents around 798 licensed brokers, said the distribution channel employs roughly 83 lakh people and that smaller policyholders and MSMEs who rely on independent intermediaries for claims assistance would be most affected.

IBAI is seeking an extension of the consultation deadline from 25 October to late December, an independent impact assessment, and removal of the proposed commission caps. It has written to Prime Minister Narendra Modi and Finance Minister Nirmala Sitharaman, and in a letter dated 2 October said that a complete overhaul of distribution within months of 100 per cent foreign direct investment signals high regulatory uncertainty. It will meet the IRDAI chairman to seek a review.

The association said it supports the regulator's broader objectives on policyholder protection and transparency, but argued the proposed architecture has no established global benchmark. On mandatory commission disclosure, it warned that mass public disclosure risks triggering illegal rebating under Section 41 of the Insurance Act.

The consultation paper, Reforms for Recalibrating Economics of Insurance Distribution, was released on 23 September and proposes product-level caps alongside lower management expense limits. Automobile dealers have also pushed back.

RBI governor Sanjay Malhotra has said the central bank will submit its own comments, given that banks are among the largest distributors. IRDAI's paper put bancassurance at nearly ₹68,000 crore of sampled corporate agency premium.

One pair of numbers in IRDAI's own data explains why the regulator went after distribution economics, and it is the hardest thing for the brokers to answer.

Between FY23 and FY25, premiums sourced through brokers in general insurance grew 37 per cent. Commissions paid to those brokers grew 173 per cent. The cost of distributing a rupee of premium rose far faster than the premium itself, which is the definition of an intermediation layer taking a larger share without delivering proportionally more.

That gap is what a paper titled Recalibrating Economics of Insurance Distribution is about. Whatever the merits of the caps, the regulator did not arrive at them arbitrarily.

It also puts IBAI's 70 per cent in context. If commissions nearly tripled while business grew by a third, a reversion towards the earlier ratio would mechanically remove most of the increase, and a large revenue fall is exactly what the proposal is designed to produce. The association is describing the intended effect of the policy rather than an unforeseen consequence of it.

Where the brokers are on firmer ground is the second-order argument. Commission funds service, and the small commercial buyer who needs help pursuing a claim is served by someone whose economics must work. A cap calibrated for a motor policy sold online may not sustain the person who visits a factory in Ludhiana.

That is a real risk and it is a different argument from the revenue one. The consultation closes on 25 October.

The strongest part of the brokers' case is not the revenue number, and they have not been leading with it.

Insurance in India is sold rather than bought. A small manufacturer in Ludhiana does not research liability cover; someone visits, explains it and returns when there is a claim to pursue. That service is funded from commission, and it is the part of the chain least visible in a spreadsheet and most difficult to replace if the economics stop supporting it.

Whether 70 per cent is the right figure is a separate question, and it is an association's estimate of harm to its own members during a consultation, which is the least neutral number available. The 83 lakh employment figure covers the whole distribution channel, including agents who are not brokers and for whom the commission changes differ.

What the dispute has established is the scale of what IRDAI is attempting. The regulator is reworking distribution economics across life, general and health at once, three weeks after a paper, with comments due in a month, while separately consulting on a public registry that would make policy and claims data portable. Taken together those two papers do not just reprice intermediation; they question how much of it is needed.

The deadline extension request is the thing to watch. A regulator confident in its impact analysis holds the date. One that grants December has accepted that the analysis is incomplete, and the market will read it that way.

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