IRDAI’s proposed commission caps could pressure bank insurance fee income
Draft distribution reforms would sharply lower commissions on insurance sold by banks, NBFCs and digital platforms, particularly credit-linked policies. Banks may seek to offset the impact through higher volumes and lower marginal selling costs; implementation is likely from FY2028.
What happened
IRDAI proposes sharp insurance-distribution commission caps for banks, NBFCs and digital platforms, especially credit-linked policies. Banks may offset lower
Key facts
- Credit-linked single-premium life commission cap: 2%, versus FY2025 average 22% and maximum 57%
- Credit-linked multi-year life: 2.5% first year and 1% renewal
- Individual health IDE commissions: 15% first time and 5% renewal
- Group health IDE commission cap: 2.5%, maximum ₹10 million
- General/standalone health insurer EOM caps: 25% in two years and 20% in five years
What changed
IRDAI proposes sharp insurance-distribution commission caps for banks, NBFCs and digital platforms, especially credit-linked policies. Banks may offset lower fee income through higher volumes, minimal marginal selling costs and permitted sales of non-insurance financial products.
Why this matters
Proposed IRDAI caps create a medium-term downside risk to bancassurance fee income—especially from credit-linked life and health policies—though volume growth and lower acquisition costs could partially offset the impact.