The Insurance Brokers Association of India (IBAI) has warned that proposed regulatory reforms by the Insurance Regulatory and Development Authority of India (IRDAI) could trigger a 60% to 70% revenue collapse across the country's insurance broking sector. Addressing a press briefing, representatives for the industry body warned that the policy changes could endanger up to 10 Lakh jobs in a distribution sector that currently employs more than 83 Lakh people.
Proposed Caps on Distributor Compensation
The industry pushback follows an IRDAI proposal to reintroduce product-wise commission caps for distributors while tightening overall expense limits for insurers due to concerns over disproportionate commission growth. In response, IBAI requested an extension of the public consultation deadline, seeking a shift from October 25 to the end of December. While supporting the regulator's objective to make insurance coverage more affordable, IBAI stated that the sweeping changes threaten small businesses and micro, small, and medium enterprises (MSMEs). The association warned that resulting staff cuts could negatively impact policy renewals, customer assistance, and overall market penetration in underserved regions.
Disputed Growth Metrics and Efficiency Claims
IBAI also contested IRDAI data showing that while general insurance premiums sourced through brokers grew 37% between FY23 and FY27, commission payouts surged 173%. The association argued that the commission rise primarily reflected the regularisation of previously off-book marketing expenses rather than inflationary pressure on consumers. According to IBAI, general insurance operating expenses averaged 26.5% of gross premiums, remaining below the mandated 30% ceiling. Furthermore, the body noted that policyholders received ₹84.4 in non-life payouts for every ₹100 of premium paid over a five-year period, outperforming the global average payout rate of 72% to 75%.
Widespread Impact on Digital Insurtechs
The regulatory uncertainty has affected digital insurtech platforms alongside traditional brokerages. Coverfox founder Sanjib Jha noted that the proposal could undermine the economic viability of distributing insurance to lower-income and rural communities. Pune-based broker Quickinsure has already cut over 100 jobs, with its leadership projecting widespread displacement across the market. Market anxiety over future earnings has also driven sell-offs in listed insurtech players, including Policybazaar operator PB Fintech and Turtlemint. IBAI confirmed it has submitted formal letters detailing its concerns to the Prime Minister’s Office and the Finance Ministry.
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Source: Insurance Brokers Oppose IRDAI Reforms, Project 70% Revenue Loss
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