IRDAI Proposes Major Overhaul to Curb Insurance Mis-Selling
By Business Desk
Discover how the IRDAI’s new consultation paper aims to overhaul insurance distribution, cut costs, and curb mis-selling in India’s market.
On September 23, 2026, the Insurance Regulatory and Development Authority of India released a public consultation paper titled Recalibrating Economics of Insurance Distribution to overhaul the insurance distribution framework.
The Core New Categories
The proposal introduces three new classifications to simplify and consolidate the currently fragmented distribution landscape across the country.
Here are the newly proposed structural entities:
- Insurance Distribution Entities
- Insurance Distribution Persons
- Market Infrastructure Institutions
These entities aim to lower capital entry barriers and encourage greater entrepreneurship in smaller and rural markets.
Expense and Commission Limits
The regulatory changes target the reduction of Expenses of Management limits for both life and general insurers to improve affordability.
The specific phased targets for life insurers are:
- 15% of Gross Direct Premium Income within two years.
- 12.5% of Gross Direct Premium Income within five years.
These limits are designed to make insurance products more transparent and cost-effective for everyday policyholders.
Safeguards Against Mis-Selling
The regulatory framework introduces strict new rules to eliminate the forced bundling of policies and prioritize customer needs over distributor incentives.
Key protective measures outlined in the paper include:
- Mandatory identification of the specific individual seller for every issued policy.
- Public disclosure of documented mis-selling incidents.
- Prohibition of volume-linked incentives for bank and NBFC staff selling policies.
- Claw-back provisions allowing the recovery of commissions in proven cases of mis-selling.
Additionally, key pricing information and product brochures must be made available to customers without requiring them to share personal contact details first.
Digital Integration and Next Steps
Digital channels such as Bima Sugam and the Public Insurance Registry are designated to serve as pull-based channels that improve policy comparison and portability.
Stakeholders have until October 25, 2026, to submit their formal feedback via the official portal, email, or prescribed Excel template.
These sweeping reforms establish the groundwork for a more trustworthy, cost-efficient, and transparent insurance ecosystem in India.