Industry Opinion · Off-Calendar
IRDAI's seismic proposal and what it means for your policies
Between FY23 and FY25, pay to life insurance's corporate agency channel rose about 125% while the business it was paid on grew about 27%. A draft released on 23 September 2026 would end that — and clients, distributors and insurers will each feel it very differently.
20%
Proposed cap · bank channel
125%
Distributor pay · FY23–FY25
48%
Policies alive at month 61
−36%
PB Fintech · 24 September
ADWIZR Intelligence
Executive Summary
2
Executive Summary · Six Shifts
A consultation paper is not a rule. But this one puts a number on something Indian policyholders have never been shown: how much of the first premium goes to the person who sold the policy. On an average participating plan, as reported, it is about 37%.
Structured across seven parts: what the paper proposes, why the regulator moved, what changes for policyholders, why distributors call it existential, how insurers absorb it, whether premiums actually fall, and what to do before the rules are final. All figures from the paper are taken from press reports quoting it; ADWIZR's own modelling is flagged as model output, not reported fact.
Six Shifts
Hard Caps Return
In 2023 IRDAI scrapped product-level caps and let insurer boards decide, inside an overall Expenses of Management limit. The new paper reverses that choice and puts a ceiling on each product again — 20% for a bank selling a long-term life plan, 25% for an individual agent.
The Expense Ratchet
15% within two years, 12.5% within five. General insurers move from about 30% to 20% over five years. This is the harder constraint: it forces cuts well beyond commission — technology, branches, marketing all come under review.
The Persistency Tell
Policies bought directly online survive at about 71%. When no seller is paid to push the sale, people buy what they need and keep it. Surrenders account for about 37% of life insurance payouts; death claims, the payout life insurance exists to make, about 7%.
Distribution Reset
The pain is not shared evenly. Lenders and car dealers selling loan-linked cover lose about 70% of payouts, banks about 36%, online platforms about 31%, individual agents about 22% and traditional brokers about 15%. Year one takes only about 8% of the hit.
The Insurer Paradox
In our base case, HDFC Life's annual profit rises about 24% and ICICI Prudential Life's about 16%, because saved commission exceeds lost margin. Both stocks fell on 24 September. Our model measures accounting profit; life insurers are valued on the value of new business, which it does not estimate.
Pass-Through Is Not Promised
Nothing in the reporting forces insurers to pass savings to buyers. Our model also estimates about ₹23,000 crore of premium a year simply not being sold, of which roughly ₹10,000 crore is credit life cover lenders could no longer bundle with loans.
Full analysis continues across Parts I – VII below ↓
At A Glance
Exhibit 01
Pay Outran Premium — Growth FY23 to FY25
Distributor remuneration against the business it was paid on, by channel
Bars scaled to the largest value (+173%). Figures as reported from IRDAI's consultation paper, 23 September 2026. Verify against the original document.
ADWIZR Intelligence
The Opening
3
The Opening
Meera Raghavan read the headline on her phone at 7:10 on Thursday morning, standing in the kitchen of her flat in Chennai while the milk came to a boil. Insurance stocks crash as IRDAI proposes commission caps. She scrolled past it. Then she scrolled back.
Meera is 41. She runs the finance team at a mid-sized logistics firm in Guindy. In 2021, the relationship manager at her bank sold her an endowment plan for her daughter's education. The premium is ₹1 lakh a year for twelve years. She has paid five of those premiums. That is ₹5 lakh so far, roughly what she paid as the down payment on the family car.
She had never asked what the seller earned. It had not occurred to her that the answer might matter. That morning, over coffee, she did the math on the back of a grocery list. She showed it to her husband Arvind before he left for work.
“If the person who sold me this earned a third of my first premium, who was he really working for?”
— Meera Raghavan, Chennai · 24 September 2026
Arvind did not have an answer. Neither did the bank. This article is our attempt at one.
Two things are worth saying before we start. The first is that nothing in this proposal changes Meera's policy this week — it is a draft open for comment until 25 October 2026, and the final rules may look quite different. The second is that ADWIZR is a fee-only adviser. We earn no commission on any product, so a crackdown on commission fits our model. Read our view with that in mind. We have given the other side a full hearing for exactly that reason.
Part I
Hard caps on every product, a tighter overall expense limit, and — for the first time — consumer rules on disclosure and dark patterns
ADWIZR Intelligence
Part I — What the Paper Proposes
4
A Draft, Not a Rule
On 23 September 2026, the Insurance Regulatory and Development Authority of India released a consultation paper titled Recalibrating Economics of Insurance Distribution. Many people are calling it a white paper. It is not. It is a draft for public comment, and comments close on 25 October 2026. Nothing in it is law yet, and nothing in it changes Meera's policy this week. The final rules may look quite different.
The paper does three big things.
It brings back hard caps on commission for each product. In 2023, IRDAI had removed product-level caps. Insurers were instead allowed to pay what their boards approved, as long as total spending stayed inside an overall limit called Expenses of Management. The new paper reverses that choice.
It tightens that overall limit. Life insurers would have to bring total expenses down to 15% of gross premium within two years, and to 12.5% within five. General insurers would move from about 30% to 20% over five years, based on reports of the paper.
It adds consumer rules. These include simple disclosure of commission policies, a ban on “dark patterns” in apps and websites, and a duty to record why a product suited the buyer.
Meera's Policy, Repriced
“Distribution entity” in the table below means banks, brokers, web aggregators and corporate agents. Individual agents get a little more. Rural and small-town sales get extra headroom — reportedly 10% more for towns under 10 lakh people and 20% more for towns under 50,000 and rural areas — which we return to in Part IV.
For Meera, the change is easy to picture. Her bank is a distribution entity. Her plan has a twelve-year premium term. Under the proposal, a bank selling that same plan tomorrow could earn at most ₹20,000 on the first ₹1 lakh premium — against the roughly ₹37,000 an average participating plan pays today, as reported.
Key Finding
The 2023 framework was not a loophole anyone exploited illegally. It was a deliberate bet that competition inside an overall cap would hold costs down. The paper's own data suggests the bet failed: insurers competed for distribution, not for customers.
Exhibit 02
Proposed Commission Caps — The Products Most Readers Own
First-year and renewal caps as a percentage of premium, as reported
| Product | Entity, yr 1 | Agent, yr 1 | Renewal (entity / agent) |
|---|---|---|---|
| Life plan, premium term 10 years or more | 20% | 25% | 3% / 5% |
| Pure term plan, regular premium | 25% | 30% | 7.5% / 10% |
| Single-premium savings plan | 1% | 2% | Not applicable |
| Individual health, first purchase | 15% | 20% | 5% / 10% |
| Motor third-party, new vehicle | 0% | 2.5% | Not reported |
Figures from press reports quoting IRDAI's consultation paper of 23 September 2026. Verify against the final document before acting on them.
Part II
Because the data in its own paper is hard to argue with — pay grew four to five times faster than the business it was paid on
ADWIZR Intelligence
Part II — Why the Regulator Moved
6
The Divergence
Between FY23 and FY25, new business premium through the corporate agency channel in life insurance grew from about ₹63,000 crore to about ₹80,000 crore. That is growth of about 27%. Over the same period, what those distributors were paid rose from about ₹9,580 crore to ₹21,600 crore. That is growth of 125%.
General insurance tells the same story. Premium routed through brokers grew about 37%. Commission paid to those brokers grew about 173%.
Our own independent modelling gives a sense of the scale. Using FY26 premium data from the Life Insurance Council, the General Insurance Council and company filings, we estimate that insurers pay distributors close to ₹1 lakh crore a year in commission and rewards across the products this proposal touches. Treat that as a model estimate, not a reported figure. It rests on our assumptions about payout rates and sales channels.
None of this was illegal. The 2023 framework allowed it. The theory was that competition inside an overall cap would keep costs in check. The paper suggests that theory failed. The bank that can place the most policies gets paid the most. The customer rarely sees the bill.
Product by Product
The product-level numbers are starker than the channel averages. As reported, average first-year commission on a pure term plan is about 51% of the first premium, with a high of about 81%. Traditional participating plans average about 37%, with a high of about 63%. ULIPs average about 14%. Company filings point the same way: first-year commission runs at about 33% of first-year premium at HDFC Life and about 26% at ICICI Prudential Life.
Exhibit 03
First-Year Commission as a Share of First Premium
Product averages from the paper, as reported · company ratios from filings
Bars scaled to the reported pure-term high of 81%. Averages as reported from the consultation paper; company ratios from HDFC Life and ICICI Prudential Life filings.
Read It From Meera's Side
On an average participating plan, more than a third of the first year's money goes to the seller. On her ₹1 lakh premium, that would be close to ₹37,000. We do not know the exact figure on Meera's own policy. Only her insurer can confirm it.
Remuneration is growing four to five times faster than the business it is paid on.— IRDAI, Recalibrating Economics of Insurance Distribution, as reported
Part III
More than half of India's life policies are dropped within five years. That number is the argument, and it is the one that should worry every family holding a savings-style policy
ADWIZR Intelligence
Part III — What It Means for You
8
The Persistency Tell
Start with the number that should worry every family that owns a savings-style policy. Based on the paper's data, only about 48% of life policies are still running by their 61st month. More than half are dropped within five years. Policies bought directly online do better, at about 71%.
That gap is a clue. When no seller is paid to push the sale, people tend to buy what they need, and they keep it.
Now look at where life insurance payouts actually go. Of about ₹6.3 lakh crore in benefits paid, about ₹2.33 lakh crore, or 37%, went to people surrendering their policies. Death claims made up about 7% — the one payout life insurance exists to make.
That is the quiet cost of high upfront commission. A policy that pays the seller heavily in year one gives the buyer very little back in the early years. Plans that are sold, not bought, are the ones people abandon. Families who surrender early often get back less than they paid in. Meera, five years into a twelve-year plan, sits right in this danger zone.
Key Finding
A 23-point persistency gap between commission-sold and direct-bought policies is not a story about customer discipline. It is a story about what gets sold to whom, and how much of the buyer's first year is spent paying for the sale itself.
What Changes, What Does Not
Exhibit 04
Where Life Insurance Money Comes Back Out
Share of about ₹6.3 lakh crore in benefits paid, and 61st-month persistency
Bars on a 0–100% scale. Figures as reported from IRDAI's consultation paper. The remaining share of benefits comprises maturities, survival benefits and annuities.
So what changes for someone like her?
For policies you already own, probably nothing directly. The proposal is about how future sales are paid. Nothing we have seen in the reporting suggests it rewrites existing contracts. Please confirm this once the final rules are out.
For policies you buy after the rules take effect, three things may shift. Sellers will have less reason to push long, costly traditional plans over simple term cover. Renewal commissions become a bigger share of what a seller earns, so keeping you as a client matters more. And disclosure should make it easier to ask the question Meera asked.
What It Does Not Mean
It does not mean you should surrender a policy today because the headlines are loud. Surrendering in year five of a traditional plan usually locks in the loss. Meera's plan was bought in 2021, so it falls under the older surrender rules, which typically return less in the early years. Her better options may be to continue, or to make the policy paid-up by stopping premiums while keeping a reduced cover. Which one is right depends on the numbers in her policy, not on this week's news.
Part IV
Why distributors call it an existential threat — and why their counter-case deserves a fair hearing rather than a victory lap
ADWIZR Intelligence
Part IV — The Distributor Shock
10
The Market's Verdict
Because for some of them, it is.
On 24 September, the market gave its verdict. PB Fintech, which owns Policybazaar, fell about 36% to close near ₹1,207, as reported by Upstox and Business Standard. More than ₹25,000 crore of market value vanished in a day. Turtlemint hit its 20% lower circuit. PB Fintech's chairman, Yashish Dahiya, had warned earlier that hard caps could pose “an existential threat” to insurance distributors, according to Inc42.
Brokerage estimates add some scale, though these are forecasts, not facts. Jefferies estimated that every 10% cut in new business commission rates could cut earnings at online distributors by 10% to 12%. Motilal Oswal estimated a worst case of a 46% fall in PB Fintech's earnings before any cost cuts.
For an online platform, the real problem is a thin margin. In FY26, PB Fintech reported revenue of ₹6,794 crore and profit before tax of about ₹707 crore. But ₹327 crore of that was interest income. The core business earned closer to ₹380 crore, or about 5.6% of revenue. When margins are that thin, a modest cut in revenue wipes out most of the profit. Across 1,000 simulated outcomes, the middle case cut PB Fintech's profit by about 73%. The range ran from about 41% to more than all of it. These are scenario results under our assumptions, not forecasts, and they are not a view on the stock.
Timing matters as much as the caps. Our model assumes the caps phase in evenly over five years. In year one, distributor payouts fall by only about 8%. The full cut arrives in year five. That gives distributors time to cut costs, reprice and change what they sell.
Exhibit 05
Modelled Fall in Distributor Payouts, Fully Phased In
ADWIZR Commission Reset Simulator · FY26 base · year 5 · model output, not a forecast
ADWIZR model, FY26 annual run-rate. Assumptions: enforcement 90%, pass-through 30%, 25% recapture by online and direct channels, credit-life bundling loss 30%, online cost offset 50%. Bars scaled to the largest fall. Not modelled: EoM caps as a separate constraint, clawbacks, second-round price competition, agent attrition, value of new business.
The Case Against Us
It would be easy to cheer this as a win for customers and move on. We think that would be lazy. Distributors make a serious case, and it deserves a fair hearing.
The first argument is simple: advice costs money. A good agent who visits a family in Coimbatore, explains term cover, and helps the widow file a claim five years later is doing real work. Even Meera's relationship manager, whatever his incentives, did sit with her and explain the plan. If that work is not paid for, it may not happen. India is badly underinsured. Many families still have little or no life cover. Commission is how most of them are reached today.
The second argument is about renewals. Health renewal commission falling to 5% for distribution entities means very little pay for the person who helps at claim time. Claims are when families most need someone on their side.
The third argument is about rural reach. The paper does offer extra headroom, reportedly 10% for towns under 10 lakh people and 20% for towns under 50,000 and rural areas. Whether that is enough to keep an agent visiting a village is not yet clear.
History gives both sides a point. In September 2010, IRDA reformed ULIPs. It spread commissions over the lock-in period instead of paying them upfront. ULIP business fell about 15% in the following year, according to IRDA's chairman at the time. Agents did not stop selling. They moved to traditional plans, where commissions were still high.
That is the lesson we keep coming back to. In 2010, the arbitrage moved from ULIPs to endowment plans. Sixteen years later, those same traditional plans top the commission tables — and Meera's plan is one of them.
This time, the caps apply across linked and non-linked products alike, so there is less room to shift. That is a real improvement. It also means the volume drop, if it comes, may be sharper.
Money follows commission. In 2010 the arbitrage moved from ULIPs to endowment plans. This time the caps cover both — which is the improvement, and also the risk.— ADWIZR Intelligence, on the 2010 ULIP precedent
Exhibit 06
Distribution, Repriced — 24 September 2026
Single-session moves in listed insurance distributors
| Company | Move | Note |
|---|---|---|
| PB Fintech (Policybazaar) | −36% | ₹1,886 to about ₹1,207. More than ₹25,000 Cr of market value erased; sources report up to ₹31,425 Cr. |
| Turtlemint | −20% | Lower circuit. |
As reported by Upstox, Business Standard and Startup Fortune, 24–25 September 2026. Inc42's earlier −26% figure for PB Fintech appears to be intraday.
Part V
On paper, most insurers come out ahead. The market priced the opposite — and both readings can be right at once
ADWIZR Intelligence
Part V — How Insurers Absorb It
13
The Split Was Telling
The market did not treat all insurers the same, and the split is telling.
On 24 September, bank-backed private life insurers fell hard. As reported by Business Standard, HDFC Life fell about 6%, Max Financial nearly 10%, and ICICI Prudential Life about 4%. LIC and SBI Life were roughly flat. SBI Life already runs a relatively low-commission bank channel. General insurers such as ICICI Lombard and Go Digit actually rose.
The logic is fairly clear. Insurers that rely on paying up for bank shelf space, like the one that sold Meera her plan, face the biggest reset. Those with cheaper channels, or those whose own costs fall when commissions fall, may even gain.
Our model adds a twist. On paper, most insurers come out ahead. In our base case, fully phased in, HDFC Life's annual profit rises by about 24% and ICICI Prudential Life's by about 16%. The commission they save is larger than the margin they lose on policies that are never sold. Standalone health insurers gain the most relative to premium, because retail health commissions are high and renewals are sticky. LIC barely moves in percentage terms, because its profit base is so large.
Why Both Readings Hold
Our model measures accounting profit. Life insurers are valued mainly on the value of the new business they write each year, which our model does not estimate. If sales fall sharply, that value shrinks even as costs drop. That is the risk the market chose to price. Fatter margins on a smaller business for a few years is a perfectly possible outcome — and it would satisfy both readings.
The Harder Constraint
For insurers, the change cuts both ways. Lower commissions mean lower costs per policy. That should help margins, at least on paper. But if distributors sell fewer policies, volumes fall. Insurers then have fixed costs spread over less business. Some private life insurers may see a slow year or two.
The tighter overall expense limit is the harder part. A move to 12.5% of premium in five years forces insurers to cut more than commission. Technology, branches and marketing all come under review. Insurers that already sell directly, or through low-cost digital channels, start with an edge.
There is also a product-mix effect. If traditional plans stop being the most rewarding thing to sell, insurers may push more term cover, more ULIPs and simpler products. For a family like Meera's, that shift could matter more than any single rule in the paper.
Exhibit 07
What the Market Did, and What the Model Says
Single-session move on 24 Sep 2026 against ADWIZR's modelled change in annual profit
| Insurer | 24 Sep move | Modelled profit change | Why |
|---|---|---|---|
| HDFC Life | −6.2% | +24% | Bank-heavy distribution; first-year commission about 33% of first-year premium. |
| Max Financial | −9.8% | Not modelled | Most exposed on the day; bank-partner dependent. |
| ICICI Prudential Life | −4.2% | +16% | First-year commission about 26%; saved commission outweighs lost margin. |
| LIC | Roughly flat | +1.3% | Agency-led, and the profit base is too large for the change to move much. |
| SBI Life | Roughly flat | Not modelled | Already runs a relatively low-commission bank channel. |
| ICICI Lombard | +5.1% | Not modelled | General insurer — its own acquisition costs fall. |
| Go Digit | +2.1% | Not modelled | Digital-first cost base. |
| Star Health · Niva Bupa | — | +5.5% · +4.3% of premium | Largest gain relative to premium: high retail health commissions, sticky renewals. |
Market moves as reported by Business Standard, 24–25 September 2026; other sources report larger falls, for example HDFC Life −8.5%. Modelled profit changes are ADWIZR model output on accounting profit only — value of new business is not modelled — and are not forecasts or a view on any stock.
Part VI
This is where we are least sure, and we want to be plain about it. Our honest reading: pass-through will be partial and slow
ADWIZR Intelligence
Part VI — Will Premiums Fall?
15
Two Honest Cases
The optimistic case goes like this. Commission is a cost built into the premium. If the cost falls, premiums on new term and health policies should fall too, or benefits on savings plans should rise. Competition should force insurers to pass the savings on.
The sceptical case is just as easy to make. Nothing in the reporting we have seen forces insurers to pass savings on to buyers. They may keep them as margin. They may spend them on other channels. Past reforms show that when one incentive is closed, another often opens somewhere else. “Rewards”, “marketing support” and “training fees” have all been used as indirect payments in the past.
There is also a real chance that some people who need cover will not buy it, because no one is paid to show up and explain it. A cheaper product that no one sells is not much help to a family with no cover.
Our model puts rough numbers on this trade-off. Fully phased in, the draft caps would save about ₹24,600 crore a year in commission. If insurers pass 30% of that on to buyers, which is our base assumption, families would save about ₹7,400 crore a year and insurers would keep about ₹17,200 crore. Across our 1,000 simulations, buyer savings ranged from about ₹3,400 crore to ₹12,700 crore a year. The range is wide because nobody knows how much insurers will pass on.
There is a cost on the other side. The model estimates that about ₹23,000 crore of premium a year would simply not be sold, around 2.4% of the premium base it covers. The largest single piece, about ₹10,000 crore, is credit life cover that lenders would no longer bundle with loans. Some of that is cover borrowers never chose and may not need. The rest is real protection that nobody turned up to sell.
Where the Saving Goes
Exhibit 08
The ₹24,600 Crore Question
Annual commission saved, and who ends up with it · fully phased in
ADWIZR Commission Reset Simulator, FY26 base, 1,000-run Monte Carlo. Pass-through is an assumption, not a rule in the paper. Model output, not a forecast.
Three Things We Will Watch
Whether IRDAI requires any link between lower commission and pricing; whether it closes the side doors for indirect payments such as rewards, marketing support and training fees; and whether early-surrender values improve for new policies. If Meera buys a term plan next year, we would not assume it will cost 20% less.
Our Own Position, Stated Plainly
ADWIZR is a fee-only adviser. We do not earn commission on any product. A crackdown on commission fits our model, so read our view with that in mind. We have tried to give the other side a full hearing for exactly that reason.
Part VII
Very little in a hurry, and a few things with care. None of them involve surrendering a policy because of a headline
ADWIZR Intelligence
Part VII — What To Do Now
17
Five Moves
01
Life and health. Note the insurer, the start date, the premium and the premium term. Many families find old endowment plans they had half forgotten.
02
Ask of each policy: is this protecting my family, or is it trying to grow money? A pure term plan does the first job cheaply. Savings-style plans do the second job, often at a high cost.
03
Ask your insurer for a written surrender value and a paid-up value. Compare both with what continuing would give you. For many policies in their early years, continuing or going paid-up is better than walking away.
04
How much will you earn on this policy, this year and next? The proposed rules should make that answer easier to get. A seller who will not answer has told you something.
05
It is a consultation, and policyholders are entitled to take part. Check the IRDAI website for the paper and the process.
The Steel Cupboard
Meera did the first of these that same evening. She found three policies in the steel cupboard in the bedroom: the endowment plan, an old money-back plan from her father's agent, and a group health cover from her employer.
She wrote each one in a spreadsheet. Then she opened her email, typed a note to her insurer asking for the surrender value and the paid-up value on the endowment plan, and pressed send before she could talk herself out of it.
“She had never asked what the seller earned. It had not occurred to her that the answer might matter.”
— The gap this paper is trying to close
That is the whole reform, in one household. Not a stock price, not a basis point on an expense ratio. A woman in Chennai asking a question she was never given a reason to ask, and being able to get an answer.
Whether the final rules deliver that is genuinely open. Consultations get diluted. Side doors get opened. But the number is now on the page, and it is hard to unsee.
ADWIZR · September 2026
ADWIZR Intelligence
Key Takeaways
19
Ten Things to Carry Away
On 23 September 2026, IRDAI proposed hard caps on insurance commissions in a consultation paper. It is a draft, not a final rule. Comments close on 25 October 2026.
As reported, the paper shows seller pay grew much faster than premiums after 2023. In life insurance's corporate agency channel, pay rose about 125% while new business grew about 27%.
Only about 48% of life policies survive to the 61st month. Surrenders made up about 37% of life insurance payouts. Death claims made up about 7%.
The proposal caps first-year commission on long-term life plans at 20% for banks and brokers and 25% for agents. Health would be 15% for entities and 20% for agents on first sale.
Distributors took the hardest hit. PB Fintech fell about 36% in one day. Bank-backed life insurers also fell, while LIC and SBI Life held steady.
Our own model suggests total distributor payouts could fall by about a third once the caps are fully in place. Lenders and dealers lose the most, then banks, online platforms, agents and brokers.
On paper, most insurers gain because saved commission outweighs lost sales. The market is pricing the risk that sales fall faster than that.
The strongest counter-case is real: advice costs money, India is underinsured, and low renewal pay may leave families without help at claim time.
Lower commission does not guarantee lower premiums. In our model, buyers save about ₹7,400 crore a year if insurers pass on 30% of the saving, while about ₹23,000 crore of premium goes unsold.
Do not surrender existing policies because of this news. Get written surrender and paid-up values first, and compare them calmly.
Investor FAQ
Eight questions we are hearing this week — answered from the draft, not the headline.
ADWIZR Intelligence
Investor FAQ
21
Frequently Asked Questions
Dates That Matter
01
Consultation paper released. Nothing in it is law.
02
Markets reprice distribution. PB Fintech −36% in a session.
03
Public comments close. Policyholders may write in.
04
Life EoM down to 15% of gross premium.
05
Life EoM down to 12.5%; caps fully phased in.
Key Terms & Definitions
Expenses of Management (EoM)
The overall ceiling on what an insurer may spend running its business, set as a percentage of gross premium. The draft would cut it for life insurers to 15% within two years and 12.5% within five — a tighter constraint than the commission caps themselves.
Distribution entity
Banks, brokers, web aggregators and corporate agents — as distinct from an individual agent. Entities face the lower cap in every product line: 20% against an agent's 25% on a long-term life plan.
Persistency (61st month)
The share of policies still in force five years after purchase. About 48% across all channels, against about 71% for policies bought directly online — the gap the paper treats as evidence that high upfront commission produces policies people abandon.
Surrender value
What the insurer pays if you exit a policy early. In the first years of a traditional plan it is usually less than the premiums paid. Policies issued before 1 October 2024 fall under the older, less generous rules.
Paid-up policy
A policy kept alive with a reduced sum assured after you stop paying premiums, instead of surrendering it. Often better than walking away mid-term — but only the numbers in your own policy can settle it.
Credit life cover
Insurance bundled with a loan to repay the lender if the borrower dies. It carries some of the richest commissions in the market, and about ₹10,000 crore of it a year would go unsold if lenders could no longer make cover a condition of the loan.
Value of new business (VNB)
The present value of future profit on the policies an insurer writes this year — the measure life insurers are mainly valued on. Our model estimates accounting profit only, which is why it can show a gain on the day the market marked these stocks down.
Fee-Only. No Commission. No Exceptions.
The structural conflict in commission-based selling is not solved by a better salesperson. If the person advising you earns ₹37,000 on one product and ₹2,000 on another, the recommendation is shaped before the conversation starts. That is not a character flaw. It is arithmetic.
ADWIZR is paid for the plan. The same fee applies whichever policy you keep, surrender, make paid-up, or never buy at all. That is why we can tell a family to do nothing — which, on this week's news, is the right answer more often than not.
The Structural Difference
Paid a flat fee for the plan
Paid a share of the premium you commit to
Recommends term cover where term cover fits
Earns 37% on the savings plan, 2% on term
Can advise you to keep a policy we did not sell
Earns nothing from advising you to do nothing
Runs the surrender-versus-paid-up arithmetic in writing
Re-sells at the moment of surrender
ADWIZR offers a conflict-free policy review. We earn no commission on any product, so our only job is to tell you what to keep, what to fix and what to leave alone.
Request a policy reviewNotes & Sources
Fact Verification & Citations
Verified: 25 September 2026
ADWIZR Intelligence · Industry Opinion · Topical
Primary Document
IRDAI Consultation Paper, Recalibrating Economics of Insurance Distribution, 23 September 2026; comments due 25 October 2026. The paper was not directly accessed — the IRDAI site blocks automated fetch. Every figure attributed to the paper in this article is taken from press reports quoting it and should be verified against the original PDF before it is relied on.
IRDAI Consultation Paper, 23 Sep 2026 — scope and timeline
Released 23 September 2026; comments to 25 October 2026; phase-in of two to five years. Life EoM to 15% of gross premium within two years and 12.5% within five. General insurance from about 30% to 20% over five years; Inc42 reports 25% within two years and 20% within five. Via Inc42, Startup Fortune, IIFL and Business Standard.
IRDAI Payment of Commission Regulations 2023 — the regime being reversed
Product-level commission caps were removed with effect from 1 April 2023 in favour of board-approved commission within overall Expenses of Management limits. The 2026 paper reverses that choice.
Proposed commission caps — Upstox, Business Today, Business Standard
Life with premium term 10 years or more: entity 20% year one / 3% renewal; agent 25% / 5%. Term, regular premium: entity 25% / 7.5%; agent 30% / 10%. Single-premium savings: entity 1%, agent 2%. Individual health first sale: entity 15%, agent 20%; renewal 5% / 10%. Motor third-party, new vehicle: entity 0%, agent 2.5%. Rural headroom: +10% for towns under 10 lakh population, +20% for towns under 50,000 and rural areas.
Paper data — channel growth divergence, FY23 to FY25
Corporate agency new business premium ₹63,000 Cr → ₹80,000 Cr (+27.0%; the source rounds to 28%). Remuneration ₹9,580 Cr → ₹21,600 Cr (+125%). Broker-routed general insurance premium ₹74,460 Cr → ₹1,01,862 Cr (+36.8%); commission ₹6,348 Cr → ₹17,348 Cr (+173.3%). The paper's summary line: “Remuneration is growing four to five times faster than the business it is paid on.”
Paper data — commission ratios, persistency and benefit mix
First-year commission averages: pure term 51% (max 81%); participating 37% (max 63%); ULIP 14%. 61st-month persistency 48%; online direct 71%. Benefits ₹6.3 lakh Cr, of which surrenders ₹2.33 lakh Cr (36.98%, reported as 37%) and death claims ₹0.47 lakh Cr (7.46%, reported as about 7%). Company filings: first-year commission about 33% of first-year premium at HDFC Life, about 26% at ICICI Prudential Life.
Market data, 24 September 2026 — Upstox, Business Standard, Startup Fortune
PB Fintech ₹1,886 → about ₹1,207, a fall of 36.0%. Market-cap loss reported between ₹25,000 Cr and ₹31,425 Cr across sources; this article says “more than ₹25,000 crore”. Inc42's −26% figure appears to be intraday. Turtlemint −20% (lower circuit). HDFC Life −6.2%, Max Financial −9.8%, ICICI Prudential Life −4.23%, LIC and SBI Life roughly flat, ICICI Lombard +5.1%, Go Digit +2.08% (Business Standard). Other outlets report larger falls, for example HDFC Life −8.5%.
Brokerage estimates — Business Standard, 25 September 2026
Jefferies: every 10% cut in new business commission rates implies a 10% to 12% earnings fall for online distributors. Motilal Oswal: worst case of a 46% decline in PB Fintech earnings. Yashish Dahiya's “existential threat” remark is an earlier statement as reported by Inc42 and is not independently verified. These are third-party forecasts, not facts.
ADWIZR Commission Reset Simulator — data inputs
FY26 base, annual run-rate, ₹ crore. General insurance premium by line (GI Council): motor ₹1,08,216 Cr, group health ₹68,641 Cr, retail health ₹56,696 Cr, fire and other ₹70,347 Cr. Life new business premium (Life Insurance Council): individual regular ₹1,26,900 Cr, individual single ₹57,664 Cr. PB Fintech FY26: revenue ₹6,794 Cr, PBT ₹707 Cr including ₹327 Cr interest income, so core profit about ₹380 Cr or 5.6% of revenue.
ADWIZR model — assumptions, not data
Current payout rates: term 45%, retail health new 35% and renewal 15%, motor third-party 8%, group health 8%, other 12%. Term pool ₹14,000 Cr, credit life ₹20,000 Cr, life renewals ₹4.5 lakh Cr. Scenario settings: enforcement 90%, pass-through 30%, 25% recapture by online and direct channels, credit-life bundling loss 30%, online cost offset 50%, tax 25%. All channel mixes, elasticities, cost offsets and insurer margins are assumptions.
ADWIZR model — results quoted in this article
Distribution payout pool ₹98,698 Cr → ₹66,358 Cr, a fall of 32.8% (“about a third”); year one −8.3% (“about 8%”). Channel payouts: lenders and dealers −70.0%, banks −36.2%, online −31.5%, agents −22.1%, brokers −14.5%. Commission saved ₹24,583 Cr; buyers ₹7,375 Cr at 30% pass-through; insurers retain ₹17,208 Cr. Premium not written ₹23,189 Cr, 2.4% of the modelled base of ₹9,58,452 Cr, of which credit life ₹10,205 Cr. Insurer accounting profit: HDFC Life +24.4% (base TTM Jun-26 PAT ₹1,975 Cr), ICICI Prudential Life +15.8% (base 9M FY26 annualised ₹1,743 Cr), LIC +1.3%; Star Health +5.5% and Niva Bupa +4.3% of premium. PB Fintech profit, 1,000-run Monte Carlo, year 5: 10th / 50th / 90th percentile −41% / −73% / −119%. Buyer savings 10th / 90th percentile ₹3,400 Cr / ₹12,709 Cr.
ADWIZR model — what is deliberately not modelled
EoM caps as a separate binding constraint, clawbacks, second-round price competition, agent attrition, changes to persistency and claims, and value of new business. All insurer results are accounting profit only. Per-share valuation scenarios produced by the model are deliberately excluded from this article to stay inside the SEBI investment-adviser and research-analyst boundary. Nothing here is a recommendation on any security.
Historical precedent — ULIP reform, September 2010
Commissions spread over the lock-in period, lock-in extended to three to five years. ULIP business fell about 15% in FY11, per IRDA chairman J Harinarayan (Business Standard, 11 April 2011). Agents shifted to traditional plans, where commissions remained high.
Cameo — illustrative and fictional
Meera Raghavan, 41, Chennai. Endowment plan bought through a bank in 2021, ₹1,00,000 a year for 12 years; five premiums paid, so ₹5,00,000 to date. Illustrative commission at the average participating-plan rate: 37% × ₹1,00,000 = ₹37,000 (“close to ₹37,000”); the pull quote's “a third” is consistent with 37%. Proposed cap for a distribution entity on a 10-year-plus term: 20% × ₹1,00,000 = ₹20,000. She is not a client, and the commission actually paid on any real policy can only be confirmed by its insurer.
Assumptions and uncertainties flagged in the text
The claim that the proposal does not alter existing contracts is inferred from reporting, not confirmed from the paper. Pass-through of commission cuts to premiums is uncertain and the paper's position on it is not known to us. On surrender values: policies issued before 1 October 2024 fall under the older surrender-value rules, as the IRDAI product regulations of 2024 changed special surrender value for new policies. That is a general statement; no figures are used.