◾ Reading the Commission Debate in Life Insurance—Through Facts, Not Fragments:My Take 🔹

 

The current discussion on commission and expense levels in life insurance, in the backdrop of proposed insurance law amendments and observations in the RBI Financial Stability Report, needs a factual and balanced reading—particularly with long term lens and taking a holistic view of things.

To begin with, IRDAI has long had explicit powers to regulate commissions as well as overall expenses of management. This regulatory authority is not a new feature introduced by recent amendments. The present commission structure is compliant with relevant  IRDAI regulations.

Now, let us look at the facts drawn from IRDAI Annual Reports, FY 2015–16 and FY 2024–25,  and various IRDAI data points.

🔹 Commission expenses as a percentage of premium for life insurers were 5.52% in FY 2015–16

🔹 This increased to 6.86% in FY 2024–25

In FY 2024–25:

🔹 Total premium grew by 6.73%

🔹 Commission expenses grew by 18%

Over the same decade, several structural shifts occurred:

🔹 Life insurance penetration remained broadly stagnant, at 2.72% in 2016 and 2.7% in 2024

🔹 Distribution channels expanded significantly in both variety and scale

🔹 The number of individual policies sold declined, even as premium volumes increased, indicating higher ticket sizes and changes in product mix

🔹 Persistency improved, pointing to better quality of business and stronger customer retention

Seen together, these data points suggest that commission figures, viewed in isolation, tell only a partial story. Life insurance is a long-duration contract, and expense analysis must reflect how the industry has evolved across distribution, products, governance, and customer outcomes.

The issue, therefore, is not about a single ratio—but about the overall health and sustainability of the ecosystem.

Some questions that merit deeper reflection:

🔹 Are commission structures aligned with persistency and long-term customer value?

🔹 Do higher premiums per policy reflect better suitability or merely affordability skew?

🔹 Is distribution economics evolving in step with quality of advice and governance standards?

🔹 Are expense controls being evaluated against outcomes rather than optics?

🔹Is not the role of Intermediary in Life Insurance sale more intense than in other financial products?

🔹 Most importantly, does the current framework strengthen trust in life insurance over time?

Only a holistic assessment—spanning distribution economics, business quality, customer outcomes, and governance—can lead to sound conclusions, not a narrow focus on one line item in the accounts.

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