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29th March 2023 (8 Topics)

Product-wise insurance commission cap removed by IRDAI


Insurance regulator IRDAI has removed the product-wise cap on commission payable by Life, General and standalone health insurers to intermediaries and instead notified that such payments will come under the expense of management (EOM) limits.

About the decision:

  • The commission payable by insurers to insurance agents or insurance intermediaries should not exceed the EOM limits specified.
  • Health insurance policies offered by Life and General insurance companies will also come under the ambit of the new regulations 


  • Flexibility: Objective of the new regulation on commissions is to provide insurers flexibility to manage expenses based on their growth aspirations and ever-changing insurance needs in the backdrop of improving insurance penetration.
  • Enhance the responsiveness: It also intended to enhance the responsiveness of the regulation to market innovation, and facilitate the insurers in development of new business models, products, strategies, internal processes and enable easy compliance. 


  • The shift from product-level commissions to a company-wide limit of expenses, as proposed, will ensure parity across varying business models while rendering greater flexibility in managing expenses for insurers.
  • With majority of the insurers above prescribed norms of expenses and with the industry reeling with a combined ratio of more than 118%, the EOM limits will help in bringing cost discipline, translate into better pricing and products for customers in the medium to long term.

About IRDAI:

  • The Insurance Regulatory and Development Authority of India (IRDAI), is a statutory body formed under Insurance Regulatory and Development Authority Act, 1999 (IRDAI Act 1999)
  • Aim: overall supervision and development of the Insurance sector in India.
  • The key objectives of the IRDAI include the promotion of competition so as to enhance customer satisfaction through increased consumer choice and fair premiums while ensuring the financial security of the Insurance market.
  • Entities regulated by IRDAI:
  • Life Insurance Companies - Both public and private sector Companies.
  • General Insurance Companies - Both public and private sector Companies. Among them, there are some standalone Health Insurance Companies that offer health Insurance policies.
  • Re-Insurance Companies
  • Agency Channel
  • Intermediaries include the following:
    • Corporate Agents
    • Brokers
    • Third Party Administrators
    • Surveyors and Loss Assessors.



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