Proposed IRDAI 5% own-damage cap draws dealer pushback in India

IRDAI’s proposed motor-insurance commission caps are facing fresh opposition from brokers and automobile dealers, who want changes to the draft and more time to respond. The proposal is not a rule in force: it is in consultation, with the current feedback deadline on 25 October 2026 and final norms targeted for April 2027 according to Mint.

Key takeaways

The draft proposes no commission on third-party motor cover for new vehicles, a 5% cap on own-damage cover and limits on renewal payouts, according to Reuters.
Insurance brokers are seeking more time than the 25 October 2026 deadline, according to Mint, and want an impact assessment before the framework is finalised.
IRDAI chairman Ajay Seth has said commission caps would be reset rather than phased in, while insurers’ wider expense limits would follow a five-year glide path, as reported by Moneycontrol.
For car owners, existing renewal quotes and policy terms do not change merely because the consultation is under way; the practical check remains the cover, exclusions and claims service in the policy offered.

What has changed in the IRDAI proposal

IRDAI released the two-part “Recalibrating Economics of Insurance Distribution” consultation paper on 23 September 2026. The official consultation portal sets out proposals on distribution structures, insurer expenses, commissions, market conduct and policyholder protection. Mint reported on 6 October 2026 that the paper proposes first-year commission ranges of 5% to 20% for distribution entities and 6.25% to 25% for agents, depending on the product and channel.

The latest development is stakeholder resistance. Mint reported that the Insurance Brokers Association of India (IBAI) planned to meet IRDAI and seek an extension of the 25 October 2026 feedback deadline until December 2026. Reuters separately reported that brokers had written to the Prime Minister and finance minister seeking intervention, an independent impact assessment and changes to the proposed caps.

What the draft says about motor insurance

Motor insurance is particularly important in this debate because dealerships distribute a large share of policies sold with new vehicles. Reuters reported on 6 October 2026 that the draft would set zero commission for third-party motor coverage on new vehicles, cap commission on own-damage cover at 5%, and limit payouts on renewals. The report attributed the dealer response to FADA, which represents more than 15,000 automobile dealers.

Those are proposed distribution-payment limits, not a new premium schedule. A cap on what a distributor may receive does not automatically mean an equal reduction in the customer’s premium. It also does not decide whether a policy provides the right IDV, add-on protection, deductible, cashless repair access or exclusions for a particular vehicle. The final effect will depend on the regulations IRDAI eventually notifies and how insurers price and service their products.

Why brokers and dealers are objecting

The industry’s objection is partly about economics and partly about roles. Brokers say an independent broker and an insurer-appointed agent perform different functions, while the proposed architecture could place them under similar treatment. They also want a transition period so smaller intermediaries can adjust their service model. Reuters and Mint reported that IBAI has warned tighter caps could make it harder to service small-ticket customers and customers in smaller cities; the association’s estimate of about 1 million distribution livelihoods at risk is an industry claim, not an official impact assessment.

Dealers have made a separate argument about motor policies. They say their work can continue beyond the sale, including policy servicing and helping customers through claims. Reuters quoted FADA’s president as saying a 5% own-damage commission may not sustain that hand-holding. That position is disputed by the regulator’s broader policy objective: IRDAI wants lower distribution costs, less mis-selling and more transparent comparisons, but has not said that every saving will appear as a fixed rupee reduction in every policy.

What IRDAI has said about the timeline

In an interview published by Moneycontrol on 7 October 2026, IRDAI chairman Ajay Seth said the proposed commission limits are maximums and that commission caps would be reset rather than introduced through a glide path. He distinguished that from insurer expense-of-management limits, which would be reduced through a five-year phased path. Moneycontrol also reported that IRDAI will put draft regulations out for public comment before the framework is finalised.

That means the consultation should not be read as an April 2027 rule change already taking effect. April 2027 is a reported implementation target, while the proposals can still change after feedback. The status to watch is the official publication of draft regulations, the regulator’s response to comments and any final notification.

What car owners can check now

There is no need to treat the proposal as a reason to alter an existing policy before its renewal date. For a new car or renewal, record the complete quote and compare the parts that affect protection: third-party cover, own-damage cover, IDV, deductibles, add-ons, exclusions, network garages and the claims process. A lower distributor payout is not a substitute for checking those terms.

Owners comparing an expired or expiring policy can use FuelPrice’s car insurance renewal and NCB guide to review the information that normally affects a renewal. For an older vehicle, the third-party versus comprehensive insurance guide explains the cover distinction that remains relevant regardless of how commission rules are redesigned. FuelPrice’s earlier report on the IRDAI motor-insurance commission proposal covers the initial draft; this follow-up focuses on the new broker and dealer response.

What to watch next

The immediate question is whether IRDAI grants more time for submissions. After the consultation, the regulator will have to decide whether the motor-specific commission limits, the distribution categories and the wider expense framework need modification. Until a final rule is notified, buyers should treat the figures as proposed ceilings and read the actual policy document and premium quote in front of them.