Business

IRDAI proposes lower commissions in health and motor insurance, with customer relief in view

The Insurance Regulatory and Development Authority of India has proposed sharp commission changes for health and motor insurance distributors, along with tighter rules against unnecessary insurance sales during loan processing. Stakeholders have until 25 October to submit their views on the draft.

Editor: AI News 24x7 Published: 25 Sep 2026, 07:59 AM Updated: 25 Sep 2026, 07:59 AM

IRDAI proposes lower commissions in health and motor insurance, with customer relief in view.

The Insurance Regulatory and Development Authority of India (IRDAI) has proposed changes that could reduce commissions paid to distributors, agents and car dealers in health and motor insurance. The draft also seeks to make insurance pricing more transparent and restrict the sale of unnecessary policies during loan processing.

The proposal is not yet a final rule. IRDAI has invited stakeholders to submit their views by 25 October. The changes could affect how insurance is sold and how much customers pay, although the final impact will depend on the rules eventually adopted.

Proposed health insurance commission changes

For health insurance, the draft proposes reducing the first-year commission for distributors from 40% to 15%. Agents would receive 20% in the first year. For renewals, the proposed commissions are 5% for distributors and 10% for agents.

The current renewal commission is described as being between 10% and 15%. The proposed structure is intended to reduce the amount paid through the distribution chain and improve transparency in insurance pricing.

The report also notes that health insurance carries 18% GST. According to industry views cited in the report, insurers increased premiums after a reduction in the tax, while customers did not receive the benefit of that reduction. The proposed commission changes could provide some relief to customers.

Motor insurance proposals

IRDAI has also proposed limiting the commission paid to car dealers for motor insurance to 15%. The proposal comes as the regulator highlights a sharp rise in motor insurance commissions over the past 2 years. Motor insurance premiums are reported to have increased by 34%, while commissions rose by as much as 259%.

In financial year 2025, ₹29000 crore was collected as motor insurance premium, of which ₹7050 crore went towards commissions. IRDAI has said motor insurance premiums lack transparency and that commissions can reach 50% in some cases. The usual rate is described as 24%.

Several parties may receive commissions in a vehicle insurance transaction, including the dealer, the broker of the car manufacturer and the concerned bank. The draft aims to bring greater clarity to these arrangements.

Direct purchase through Bima Sugam

Under the proposal, every car dealer would have to keep a scanner in a publicly visible place. Customers could scan it to access the Bima Sugam portal and buy third-party insurance directly. Dealers would also be required to inform customers about the portal.

The portal is intended to provide detailed information from insurance companies and allow insurance purchases. Direct buying could reduce the commission paid to the dealer.

New car buyers must currently purchase at least 3 years of third-party insurance. Separate insurance is also available to cover damage to the car. The proposed changes are therefore particularly relevant to customers arranging insurance while buying a new vehicle.

Conclusion

IRDAI's draft focuses on lowering distribution commissions, improving transparency and limiting unnecessary insurance sales. Stakeholders can submit comments until 25 October, after which the regulator's final decision will determine whether these proposed changes take effect.

Frequently Asked Questions

Q. What has IRDAI proposed for health insurance commissions?

The draft proposes a 15% first-year commission for distributors and 20% for agents. Renewal commissions would be 5% for distributors and 10% for agents.