Insurance regulator IRDAI likely to tighten commission norms

📌 Summary:

• IRDAI has proposed tighter transparency norms for insurance intermediaries (agents, brokers, corporate agents, banks, web aggregators, third-party administrators): those above a commission-income threshold must make detailed annual disclosures to the regulator and publish them on their websites

• Disclosures to include commission earnings, related-party transactions, profits from operations, and dividend repatriation to promoters/parent entities

• Aim: improve disclosure standards, curb rampant mis-selling, and give policyholders a clearer picture of intermediary earnings in a commission-driven market

• IRDAI is also working on a cap on commissions — enabled by the January 2026 amendment to the Insurance Act that empowered the regulator to prescribe commission ceilings

• Key data: total commission paid by 26 life and 28 non-life insurers crossed Rs 1 lakh crore in FY25 — life insurers Rs 60,800 crore; non-life industry Rs 47,266 crore; commission-expense ratio rose to 6.86% in 2024-25 from 6.21% in 2023-24

• In life insurance, high commissions add to policy costs; in non-life, broker commissions can range 2.5–10% for large corporate accounts

🎯 UPSC Relevance: GS2/GS3 — regulatory bodies and financial-sector consumer protection; statutory regulator tightening market conduct

📝 Prelims Facts:

• IRDAI — statutory body under the IRDA Act, 1999; HQ Hyderabad; regulates insurance sector
• January 2026 amendment to the Insurance Act empowered IRDAI to prescribe commission ceilings
• Insurance industry commission payouts crossed Rs 1 lakh crore in FY25

🔑 Key Term: Mis-selling — selling financial products through misrepresentation or unsuitable advice, often driven by commission incentives; a key consumer-protection concern in insurance.