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IRDAI working on a new draft notification for commission rules: The Insurance Regulatory and Development Authority of India (IRDAI) is set to release draft rules on insurance
commissions soon, tightening limits on payouts and rewards to protect policyholders. After the insurance Act amendment, Sabka Bima Sabki Raksha, IRDAI is now more empowered to set fresh limits on commissions, remuneration and rewards. Sources told ET Now that IRDAI is working on a new draft notification for commission rules and in next few days the statutory body will come up with the draft and inputs from stakeholders. The sources further said that the new rules are likely to be implemented from April 1, 2026.
Meanwhile, the Reserve Bank of India's Financial Stability Report (FSR) raised concerns over rising distribution costs in the sector. The report has flagged higher insurance commissions as a key risk, warning that elevated distribution expenses are being embedded into product pricing, thereby affecting both affordability and insurance penetration.
Under Section 40 of the new act amendment, IRDAI is all set to come up with new rules for commissions and distribution.
IRDAI is a statutory body formed under an Act of Parliament, i.e., Insurance Regulatory and Development Authority Act, 1999 (IRDA Act, 1999) for overall supervision and development of the Insurance sector in India.
The powers and functions of the Authority are laid down in the IRDA Act, 1999 and Insurance Act, 1938. The Insurance Act, 1938 is the principal Act governing the Insurance sector in India. It provides the powers to IRDAI to frame regulations which lay down the regulatory framework for supervision of the entities operating in the Insurance sector. Section 14 of the IRDA Act,1999 specifies the duties, powers and functions of the authority.
In its latest annual report, IRDAI said that mis-selling is a significant concern in the insurance sector and insurers need to conduct a root cause analysis to identify the underlying causes.
According to the Press Trust of India, citing the report, the total number of grievances registered against life insurers has remained almost the same at 1,20,429 in 2024-25 against 1,20,726 in 2023-24, whereas the total number of grievances registered under UFBP (Unfair Business Practices) has increased from 23,335 in 2023-24 to 26,667 in 2024-25.
Thus, the share of UFBP grievances to total grievances has increased to 22.14 per cent in FY25 compared to 19.33 per cent in the previous fiscal.
