IRDAI motor insurance commission plan: brokers warn of servicing risks

Insurance Brokers Association of India (IBAI) has challenged parts of the Insurance Regulatory and Development Authority of India’s (IRDAI) proposed commission reset, warning that lower payouts could make motor-policy servicing and insurance access harder in smaller towns. The proposal is still under consultation, so it does not change a vehicle owner’s current premium, renewal date or third-party insurance requirement.

Key takeaways

IBAI says the proposed caps and lower expense limits could squeeze the staff and networks that support sales, renewals and claims.
IRDAI’s paper is aimed at product- and channel-specific commission limits, lower distribution costs and stronger safeguards against mis-selling.
IRDAI said motor premium grew 34% from FY23 to FY25, while motor commission grew 259%; third-party commission rose from 4.3% to 22% in the same period.
Public comments on the consultation are open until 25 October 2026. No final effective date has been notified.

Editorial illustration of a road network connecting a city with a smaller-town motor-insurance service point in India

Editorial illustration generated for FuelPrice; it represents insurance servicing access and is not a photograph of a specific insurer, broker or official document.

Why brokers are pushing back

IRDAI released its two-part consultation paper, “Recalibrating Economics of Insurance Distribution”, on 23 September 2026. The draft proposes a reset of how insurers and distributors are paid, with limits linked to the product, distribution channel, complexity and effort involved in selling and servicing a policy. It also proposes tighter expense-of-management limits for insurers and measures intended to reduce mis-selling and improve transparency.

The regulator’s case rests partly on the growth in distribution payouts. Business Standard, reporting figures from the IRDAI paper, said motor premium grew 34% between FY23 and FY25, while motor commission rose 259%. It also reported that third-party commission increased from 4.3% to 22% despite regulated pricing. The figures explain why IRDAI is examining commission economics, but they do not mean that every motor policy has been overpriced or that a final cap will automatically reduce premiums.

The proposal remains a consultation document. It is therefore important to separate what is confirmed from what is expected: the paper and its proposed caps are confirmed as an IRDAI consultation; any final limits, effective date or premium impact are not yet confirmed.

What IBAI says could change

IBAI, which represents 798 licensed insurance brokers, has asked IRDAI to retain the 2023 expense-of-management framework, publish a regulatory impact assessment and focus the strictest commission controls on credit-linked and other sales where customers have limited choice, according to Business Standard’s 2 October report.

The association’s concern is not limited to the amount paid for acquiring a policy. It says the combined effect of tighter commission caps and lower insurer expense limits could make it less economical to maintain sales, renewal, claims and servicing teams, particularly outside major cities. The possible result, in IBAI’s view, is consolidation or exits among intermediaries and weaker reach in smaller towns. That is an industry warning, not an established outcome.

The Economic Times reported on 30 September that IBAI supports parts of the paper, including a ban on compulsory insurance bundling with loans, suitability requirements, clawbacks for proven mis-selling and greater transparency around related-party payments. Its objection is to the breadth and calibration of the proposed caps, not to every consumer-protection measure in the draft.

What this means for car and bike owners

A commission limit is a ceiling on distribution remuneration, not a guaranteed discount for the customer. Even if the final framework lowers payouts, the saving would not automatically appear as a lower premium unless insurers change their pricing. Actual motor-insurance prices will continue to depend on the vehicle, location, insured declared value, claims history, selected cover, add-ons, taxes and underwriting.

The more immediate consumer question is service. A policy is not only a certificate and a premium: owners may need help with a renewal, a policy correction, a cashless-repair process or a claim. If the final rules change which intermediaries can economically provide those services, the effect may be felt differently in a large city and a smaller town. Owners can review the distinction between third-party and own-damage cover in this car insurance coverage guide, while the earlier IRDAI motor-insurance reform report explains the proposed motor-policy commission grid and possible timing.

What to check while the draft is open

Keep the proposal separate from current rules. A consultation paper does not cancel valid cover or remove the legal requirement for third-party insurance on vehicles using public roads.
Read the quote line by line. Compare the third-party cover, own-damage cover, add-ons, taxes and any separately stated charges instead of treating a commission headline as a premium saving.
Record the service route. Note the insurer, intermediary or branch handling renewals and claims, and check how support is provided if the vehicle is used away from a major city.
Watch the final notification. The consultation closes on 25 October 2026. The final document, effective date and transition rules matter more than the current proposal when a policy is renewed.

For an older vehicle, the coverage decision can also differ from the way a new-car policy is presented; the third-party versus comprehensive insurance guide for older cars sets out the factors to compare. The practical takeaway is to check coverage and service contacts in the policy documents, and not assume that a proposed commission change is already a price change.