IRDAI Weighs Staggered Commissions for Insurance Distributors to Curb Mis-Selling

The Insurance Regulatory and Development Authority of India is considering a significant overhaul of how insurance distributors are paid, weighing a shift away from large upfront commissions toward payouts staggered across the life of a policy. Under the current structure, agents and intermediaries often earn a substantial share of their total commission in the first policy year, an arrangement critics say creates an incentive to push new sales rather than ensure products suit a customer's long-term needs. Spreading remuneration over the policy term would align distributor earnings with policy persistency, meaning agents would benefit only if customers stay covered and continue paying premiums. The regulator has framed the proposal as a way to curb mis-selling, improve customer outcomes and align India's distribution framework with practices used in other major markets. The move follows related steps including revised remuneration norms that link senior executive pay to claims settlement, grievance redressal and policyholder outcomes, alongside the regulator's warnings that rising commissions and weak profitability are undermining policyholder value and sector resilience. Industry response will be closely watched, as distribution economics underpin much of India's life insurance sales model.