India's IRDAI Extends Insurance Distribution Feedback Deadline to October 31 After 650 Comments

India's insurance regulator has given companies, intermediaries and the public six more days to comment on a planned overhaul of how insurance is sold, priced and presented, pushing the deadline to October 31 from October 25. The Insurance Regulatory and Development Authority of India said in a release issued on Saturday that it had received more than 650 comments on its consultation paper, published on September 23 under the title Recalibrating Economics of Insurance Distribution.

The extension matters well beyond policy paperwork. The proposals would reshape insurance distribution costs, largely by capping what insurers and intermediaries can earn on sales, and those earnings support jobs and fee income across banks, finance companies and agency networks.

What the draft proposes

According to the regulator, the consultation covers three broad areas: the costs of distributing insurance, safeguards against dark patterns in customer journeys, and a framework for Mutual Insurance Intermediaries. It proposes lower expense of management limits for insurers and caps on commissions that vary by segment, line of business, distribution channel and product complexity, with separate limits for individual and corporate distributors and higher caps for individuals to reflect the greater sales effort involved. Customers would be able to examine product features and pricing and compare policies before sharing personal information.

IRDAI Chairman Ajay Seth has said the regulator is still engaging with stakeholder groups and has not reached a conclusion. He said the aim is a more efficient regime without disrupting existing businesses or livelihoods, and that some groups have asked for a longer transition while others have raised concerns about low-ticket policies. The regulator has asked for comments backed by business and economic reasoning, especially on how changes would benefit policyholders.

Lenders count the cost

Private sector lenders are already modeling the impact on insurance distribution income. RBL Bank expects a 50 to 60 percent hit to about 300 crore rupees of annual bancassurance income if the draft is implemented as written. AU SFB anticipates some headwind and is looking to foreign exchange, credit cards and trade finance to support fee income. Axis Bank Executive Director Subrat Mohanty said the lender is taking a medium-term view and building fee income from multiple sources. HDFC Bank described the proposed commission cuts as quite high but sees room through higher insurance volumes, persistency and cost efficiencies.

Analysts at JM Financial estimate that insurance distribution income across banks in its coverage rose from 3.5 percent of profit before tax in the year through March 2023 to 5.1 percent in the year through March 2026, and from 4 basis points to 7 basis points of average assets. For smaller lenders the exposure is sharper: the brokerage estimates insurance income contributed 19.2 percent of Ujjivan Small Finance Bank's profit before tax in fiscal 2026.

Non-bank finance companies have asked for a five-year transition. In an October 24 submission, the Finance Industry Development Council told the regulator that proposed caps of 2 percent for credit life and 5 percent for credit health insurance would make credit-linked distribution unviable, since distribution costs run at about 32 percent of premium. The industry body proposed cutting commissions from the current 45 to 49 percent to 25 percent over five years, warning that steep cuts could push lenders out of the business.

What to watch next

The Confederation of General Insurance Agents Associations of India, which says it represents 1.6 million individual general insurance agents, has urged the government to focus on claim costs instead of squeezing distribution. It pointed to an incurred claims ratio of 84 to 87 percent and called for standard hospital tariffs and regulated motor repair bills, arguing that tighter expense caps could weaken consumer support and threaten agents' livelihoods.

The regulator's next step is to review the submissions before deciding on draft regulations. For workers, the outcome will shape how many distribution, relationship and claims support roles lenders and agents can sustain, and how quickly banks diversify fee income away from insurance. Companies will be watching whether the final rules carry a phased timeline, a carve-out for small-ticket policies or any easing of the expense limits.