India's insurance regulator has proposed sweeping caps on distributor commissions, rattling markets. IRDAI released a consultation paper titled 'Recalibrating Economics of Insurance Distribution' on September 23, proposing product- and channel-wise commission limits instead of one blanket ceiling. Comments are open until October 25.

PB Fintech, the parent of Policybazaar, plunged 34-36% in a single session on September 24, while Turtlemint hit its 20% lower circuit, reflecting investor fears of sharply compressed commission structures.

Key proposals include nil commission for distribution entities on new-vehicle third-party motor insurance, a 15% cap for entities on first-year individual health policies, and tighter expense limits — life insurers' management expenses capped at 15% of gross direct premium in two years and 12.5% in five years, with general insurers moving from 30% to 20% over five years.

IRDAI's rationale: payouts to distributors grew 125% between FY23 and FY25 while new business premiums rose only 28%. Commissions more than doubled from Rs 48,000 crore in FY21 to Rs 1.08 lakh crore in FY25, according to reports. The industry now awaits the final rules, which could reshape how insurance is sold in India.