IBAI Petitions PM Modi Over IRDAI Distribution Reforms Warning Ten Lakh Jobs at Risk — October 6, 2026

The Insurance Brokers Association of India (IBAI), the apex industry body representing 798 licensed insurance brokers, has formally petitioned Prime Minister Narendra Modi and Union Finance Minister Nirmala Sitharaman to halt sweeping distribution reforms proposed by the Insurance Regulatory and Development Authority of India (IRDAI). In its representation, the brokers' association warned that the proposed framework puts at least 10 lakh livelihoods at risk over a five-year horizon and threatens to roll back years of progress in deepening insurance penetration across semi-urban and rural markets.

The controversy follows IRDAI's release of a consultation paper titled "Reforms for Recalibrating Economics of Insurance Distribution" in late September. The regulator's draft proposes over 30 distinct commission caps segmented by product line and distribution channel, alongside a roughly one-third reduction in insurers' allowable expenses of management (EoM). Under the proposals, management expense limits for life insurers would decline from current ceilings of 30%–35% to 15% within two years and 12.5% within five years, while general insurers would see ceilings curtailed from 30% to 20% over a five-year period.

Severe Impact on Ground-Level Intermediaries

According to regulatory data cited by the IBAI, India’s broader insurance distribution ecosystem supports more than 83 lakh professionals, encompassing individual agents, micro-insurance agents, point-of-sale persons (POSPs), and motor insurance service providers (MISPs).

The association highlighted that brokers play an outsized role in sustaining these networks:

• Brokers sponsor 14.81 lakh of the country's 27.18 lakh POSPs, primarily self-employed individuals operating in Tier-2 and Tier-3 towns.
• Intermediaries back 16,230 of India's 26,316 motor insurance service providers, representing approximately 62% of the channel.
• Forcing severe reductions in distributor remuneration will make it economically unviable for local intermediaries to service clients outside primary metropolitan clusters.

IBAI noted that India's insurance penetration remains subdued at approximately 3.7% of GDP compared to a global average exceeding 7%, arguing that curbing field-level earnings runs contrary to the government’s stated mission of achieving "Insurance for All by 2047".

Fears of Tax and Regulatory Arbitrage

Beyond job losses, IBAI argued that reverting to granular, sub-capped commission limits risks reviving unethical off-book practices that plagued the industry before the 2023 EoM regulations took effect. Prior to the 2023 consolidation, insurers and distributors frequently circumvented caps by masking distribution payments under marketing fees and consultancy charges, culminating in ₹824 crore worth of fraudulent Goods and Services Tax (GST) input tax credit claims detected across 15 insurers.

The association contended that public-sector insurers, subject to rigorous government audits, would be placed at an asymmetric disadvantage against private peers if off-book arrangements resurface. Furthermore, IBAI presented industry figures showing that general insurers' management expenses had already dropped from 28.2% of gross premium in FY23 to 26.5% in FY25, even as premiums expanded by roughly 13% annually, demonstrating that existing regulations were functioning effectively.

Calls for a Formal Impact Assessment

While expressing support for regulator-led measures to eliminate coerced loan-linked bundling, enforce sales suitability, and claw back commissions on mis-sold policies, the IBAI urged the Centre to defer any final notification.

The body has requested that the Union Government instruct IRDAI to allow the existing 2023 expense framework to operate until its scheduled review in 2028. Additionally, it insisted that no hard commission caps be enacted without a published regulatory impact assessment analyzing their ramifications on policyholders, employment, public sector underwriting margins, and foreign direct investment confidence. Stakeholders have until October 25 to submit formal feedback on the consultation paper.

Tags: IRDAI IBAI Insurance Sector Financial Services Indian Economy