What Does IRDAI's Distribution Reforms Consultation Paper Propose, and What Changes for Policyholders?

1. What was actually published

IRDAI released the paper on 23 September 2026 in two PDFs: Part 1, eighty pages of proposals, and Part 2, forty-one pages of evidence, most of it near-anonymised commission data for every line of business and every channel, which IRDAI says it published so that the debate would have the numbers in front of it ^[1]. Both are here, unchanged from the copies IRDAI posted at iib.gov.in/dr: Part 1, the proposals (PDF, 3.1 MB) and Part 2, the data (PDF, 1.5 MB).

Most of the coverage on 24 September worked from a press summary, which is why two of the things most often repeated about it are slightly wrong.

The first is the expense ceiling for general and health insurers. It is not a straight move to 20%. Box 2 sets 25% of premium within two years and 20% within five, with FY2027-28 as Year 1 and a cut required every year along the way. Life insurers go to 15% and then 12.5%. Any life insurer already below that in FY25 must reach 10% ^[1].

The second is timing. Several reports implied the caps are imminent. The paper sets no date for them at all ^[1], and comments stay open until 25 October. The final numbers may well move: the paper itself asks whether its limits strike a fair balance with what distributors need to earn (question 19).

The reason for the paper is in its Part 2 data, and it is not subtle. Retail health premium placed through sampled brokers grew about 53% between FY23 and FY25. Broker commission on it grew about 118%, and the average rate went from around 10% to 30% ^[2,1]. Motor is worse: premium up 34%, commission up 259% ^[1]. IRDAI's conclusion is that the flexible expense regime it introduced in 2023 was "largely channelled into higher distributor pay-outs" ^[1]. Its remedy is hard caps.

2. What changes for a health insurance policyholder

Start with the table above, and read the renewal row twice. A new sale today averages 24% commission against a proposed 15-20%. That cut is real, but it is roughly a third. A renewal averages 14% ^[2] against a proposed 5% or 10% ^[1]. IRDAI's principles say why: a product "with high demand and awareness of policyholders" should pay much less to renew than to sell, because nobody needs persuading to renew health cover they already hold.

The port row matters just as much to anyone who has had a call urging them to switch insurer, because a port is paid as a fresh sale today, at new-business rates, even though the seller is moving a customer who was already insured rather than finding a new one. IRDAI notes that 55% to 60% of all port requests are concentrated among four or five insurers ^[1]. It reads that as churn. Under the draft, a port pays the renewal rate, not the new-sale rate. The money behind the churn call mostly disappears.

That does not make porting a bad idea. It will often still be the right response to a steep renewal, and the rules for doing it, including the 30-to-60-day application window ^[5,6], are on can your insurer raise a senior's premium by more than 10%. What changes is that the advice to port should increasingly come from people who are not paid more for giving it.

3. Will premiums actually fall?

This is the question most people searching this paper want answered, and the honest answer is: nobody knows yet, and the paper does not promise it.

What the draft does is cap what insurers may spend. It caps commission line by line, and it caps overall expenses at 25% and then 20% of premium for general and health insurers ^[1]. Where the saving goes is left to the insurer. IRDAI's own history of this market is not encouraging: it finds that standalone health insurers "largely channelled underwriting margins into commissions and operating expenses rather than lower premiums" ^[1]. It also finds the top six retail health insurers raised prices on their best-selling products by about 6% to 15% a year, and names distribution cost alongside medical inflation as a cause ^[2].

Our reading, and it is a judgement rather than a finding: expect slower increases, not reductions. A health insurer that stops paying 14% to renew a policy has several points of premium it no longer has to recover, and with medical inflation still running and nothing in the draft requiring the saving to reach the customer, that is far more likely to show up as a smaller hike next year than as a lower bill. We could be wrong. For anyone over 60, the 10% annual ceiling on senior premium revisions ^[7] still applies regardless of what happens here. That rule is already in force, and it is covered in full on the senior premium cap page.

4. What changes in how you buy, whatever happens to price

Some of the most useful proposals for a buyer have nothing to do with commission rates.

• Prices without a phone number. Product sheets, brochures, premium rates and performance data would have to be available without giving a name, number or email. The paper calls today's forms a "dark pattern" and says access to information "should not be used as a lead generation opportunity" ^[1].
• A call from the insurer itself before cover starts. Whatever channel you buy through, the insurer would verify you directly, by OTP or Aadhaar face authentication, before issuing the policy ^[1]. IRDAI's stated reason is that mis-selling and non-disclosure of material facts are the root cause of most grievances, and a form someone else filled in for you is where both start.
• Your money goes straight to the insurer. Premium would be paid from your own UPI, card or bank account directly to the insurer, and claims paid only into your own verified account or your nominee's ^[1].
• The seller's name on the policy. Every policy would carry the identity of the person who sold it. Mis-selling incidents would be published against that person, and the insurer would claw back the commission ^[1].
• No compulsory insurance with a loan. A bank or NBFC could no longer make a loan conditional on buying a policy ^[1]. Health cover bundled with a home or car loan is singled out as something "to be discouraged" even when it is voluntary.
• Claim ratios by money, not by count. IRDAI says the claim settlement ratio insurers advertise, counted by number of claims decided, is the less useful one. By amount paid, the health ratio across all general insurers in FY25 was 75%, ranging from 29% to 94% between insurers ^[2]. The paper publishes those figures without insurer names. Under the proposals, standard definitions would follow.

If a claim has already been refused, none of this helps yet. The routes that work today are on a senior's claim was refused: what next. They are worth using: in FY26, 63% of complaints resolved on IRDAI's Bima Bharosa portal went the policyholder's way, as did 75% of claims decided by the Ombudsman ^[1].

5. Why Policybazaar and insurance stocks fell

Insurance and insurance-linked stocks fell 10% to 20% on 24 September. PB Fintech, Policybazaar's parent, fell as much as 28% to an intraday low of ₹1,360.80 on BSE ^[3,4]. The reasons are in the text, and there are three.

The paper deliberately pays open platforms less than tied agents: brokers, banks and aggregators can sell many insurers' products, and IRDAI sets their caps below those for an insurer's own agents "to create disincentive against commission-led sales", on the reasoning that a seller with a dozen insurers' products on the shelf has every reason to recommend whichever one pays best. It goes further in question 16 and asks whether open architecture "has served its purpose or is it simply increasing costs" ^[1]. Online platforms are on the losing side of that design.

The retail health gap is the widest. IRDAI's figure for average retail health commission through brokers is about 30% ^[2,1]. The proposed cap for any distribution entity on a first-time policy is 15%, and 5% on a renewal. The cap also counts rewards, incentives and brand payments to related parties ^[1], which closes the usual route around a headline rate.

The business model itself is in the paper. Platforms that show prices only after collecting a phone number would be running what IRDAI calls a dark pattern ^[1]. They could not handle customer money. They would have to publish their commission structures, and those with more than ₹100 crore of insurance income would face an annual cost audit ^[1].

The draft is not all loss for them, and the market's first reaction ignored that. Entry capital drops to ₹10 lakh from as much as ₹5 crore for a broker today ^[1]. Distributors could also sell mutual funds, loans and other products that brokers are barred from selling now ^[1]. Emkay Global's view was that the intent "could be noble", but that "the drastic cut in distribution commission would also make insurance distribution an unviable business and an unattractive vocation" ^[4]. The consultation window exists for that argument to be made, and it will be.

6. Who wins and who loses

The life table rewards a policy you keep rather than a policy you are sold. Only 48% of life policies are still in force at the 61st month, against 71% of those bought online, and surrender pay-outs made up 37% of everything life insurers paid out, more than they paid on maturities and five times what they paid on deaths ^[1,2]. Single-premium savings plans drop to a 1% cap. Pure term cover keeps the highest caps in the life table. Of all the choices in the paper, that one is probably the clearest signal of what IRDAI wants sold.

8. How to have your say

Comments are open to anyone until 25 October 2026: through the form at iib.gov.in/dr, by uploading IRDAI's Excel template on the same page, or by emailing it to [email protected] ^[1]. The paper lists 32 questions. For a policyholder, three matter most. Question 18 asks whether buyers are ready to pay a seller a fee directly instead of an undisclosed commission ^[1]. Question 19 asks whether the caps are fair. Question 22 asks what else transparency should cover.

We will update this page when IRDAI publishes its response to comments and again when final regulations are notified. For how senior health policies compare on the terms that decide a claim, see the best and worst senior health insurance in India.