IRDAI motor insurance proposal draws broker pushback; buyers wait

IRDAI’s proposed overhaul of insurance distribution is not final, but it has now drawn formal pushback from the Insurance Brokers Association of India (IBAI). For car and bike owners, the immediate message is that the consultation paper does not change an existing policy today, while the way new motor cover is sold and disclosed could change if rules are eventually notified.

The development is a follow-up to FuelPrice’s earlier report on the proposed motor-insurance glide path. The regulator has opened a consultation process, so the current discussion is about what may change, not a new premium or renewal rule already in force.

Illustrative motor-insurance paperwork, a vehicle inspection checklist and a consultation between brokers and a regulator

Illustrative image: motor-insurance paperwork and a regulator-industry consultation. No insurer or official document is shown. Illustration: FuelPrice, AI-generated.

Key takeaways

IRDAI’s distribution reset is a proposal, not a notified rule; stakeholder comments are open until 25 Oct 2026.
IBAI says lower commission caps and tighter expense limits could reduce servicing capacity, especially in smaller towns.
IRDAI Chairman Ajay Seth says feedback will be considered before draft regulations, and those draft regulations would go through another consultation.
For buyers, the useful comparison remains the full cover, exclusions, premium breakdown and claims support—not the seller’s commission alone.

What changed this week

IRDAI released its two-part public consultation paper, “Recalibrating Economics of Insurance Distribution”, on 23 Sep 2026. The paper covers the structure of distribution, insurer expenses, commissions, market conduct, transparency and digital infrastructure. The regulator’s stated aim is to align the cost of selling insurance more closely with policyholder value and the work involved in serving a customer.

On 29 Sep, IBAI said it would engage with IRDAI on the proposed framework. In its response, reported by Business Standard, the brokers’ body warned that caps below the cost of servicing customers could weaken independent distribution and reduce access in smaller cities. IBAI supports the stated goals of transparency and curbing mis-selling, but has asked the regulator to assess the effect on claims assistance, customer choice and employment before finalising a rule.

In a Business Standard interview published on 30 Sep, Seth said the proposals are not final and that feedback from insurers, distributors and policyholders will be considered. He also said IRDAI would issue draft regulations for another round of public comments before any final notification.

What IRDAI is proposing

The draft would simplify the categories used for insurance distributors and introduce a more detailed commission framework based on the product, the distribution channel and the effort needed to sell and service the cover. It also proposes lower expense-of-management limits through a glide path, wider disclosure of commission arrangements and safeguards against mis-selling.

For motor insurance, reporting on the draft describes different treatment for third-party and own-damage cover and for different distribution channels. A nil commission cap has been reported for distribution entities on specified new-vehicle third-party cover. That is a proposed payment rule inside the distribution chain; it does not make third-party insurance free, set a current retail premium or change the cover attached to a policy already issued.

The paper also points towards digital infrastructure such as Bima Sugam and the Public Insurance Registry. The intended consumer benefit is easier comparison and servicing, but the practical outcome will depend on the final rules, the information made available and how insurers implement them.

Why the broker response matters

Motor insurance is often offered alongside a new vehicle, while renewals and claims require continuing service. A lower payout for distribution may reduce some acquisition costs over time, but it can also change which channels offer help with documentation, endorsements and claims. That is why IBAI is focusing on the cost of servicing a customer rather than only on the headline commission.

IRDAI’s position is that insurers should compete on the price and quality of their products and service, not on their ability to pay higher distribution costs. The two views are not mutually exclusive: a rule can seek lower distribution costs while still needing safeguards so that comparison, advice and claims support do not become harder to access.

FuelPrice’s earlier report on the IRDAI motor-insurance glide path explains the prior buyer questions around the proposal. This new stage is about stakeholder response and the regulator’s clarification that the process is still open.

What car and bike buyers can check

Until a final notification is issued, the paper is not a reason to assume that a premium will fall or that a renewal will be handled differently. For a purchase or renewal, a practical checklist is:

Separate the mandatory third-party portion from own-damage cover, add-ons and applicable deductibles.
Compare the insured declared value, exclusions, deductibles, repair conditions and no-claim benefits against the premium.
Check who will service endorsements and claims, and how complaints can be escalated.
Ask for an itemised premium and keep the policy wording, payment record and vehicle details together.

The distinction between third-party and comprehensive protection is covered in FuelPrice’s third-party versus comprehensive car-insurance guide. Readers comparing claim processes can also use the car-insurance claim rejection guide for background on documents and common disputes.

What happens next

Stakeholders can submit comments to IRDAI until 25 Oct 2026. The authority is expected to review the responses, publish draft regulations for another consultation and then decide whether, when and in what form to notify the final framework. The effective date is therefore not confirmed.

For drivers and vehicle buyers, the safe reading is to treat the commission caps, digital changes and any possible effect on premiums as proposed. Current insurance obligations and policy terms continue to be governed by the rules and contract in force unless an authorised notification says otherwise.