Life Insurers Increase Commission Payout In FY25

Life insurers appear to have loosened the purse strings a bit on commission payouts in FY25. The industry’s commission expense ratio, essentially the share of premium income paid out as commissions, rose to 6.86 per cent, up from 6.21 per cent a year ago, according to the handbook of Indian Insurance Statistics. The shift indicates that insurers spent more to push sales, even as the business environment remained competitive and customer acquisition costs stayed elevated.

Private life insurers saw a noticeable jump in commission spending in FY25, with their commission expense ratio climbing to 8.94 per cent from 7.22 per cent a year earlier. In contrast, the state-run Life Insurance Corporation (LIC) of India reported a slight decline in this metric, with the ratio easing to 5.18 per cent from 5.46 per cent in FY24.

In India, life insurance is still largely sold rather than bought. Many customers prefer advice before committing to long-term policies, particularly savings-linked and protection products. That keeps agents, brokers, and other intermediaries firmly at the centre of the business, despite steady growth in digital channels.

Private Sector Insurers Step Up Spending

Private insurers were the main drivers of the increase. Many insurers widened their sales reach during the year and sweetened commissions to encourage fresh business. Such moves are quite typical when companies are trying to scale up, be it by entering new markets, sharpening their competitive pitch, or giving a push to select policy categories. At the same time, attractive payouts also help insurers hold on to seasoned agents, who remain a key part of the distribution chain.

Retaining productive advisers can be as important as attracting new customers, and insurers frequently adjust payouts to keep their distribution networks stable.

The public sector leader, however, showed a slight moderation in its commission ratio. That suggests a somewhat tighter grip on distribution costs, even while maintaining a vast agency force across the country.

Balancing Growth With Cost Discipline

Rising commission payouts are not unusual during expansion phases, but they do have implications. Distribution costs ultimately feed into an insurer’s expense structure, which can affect product pricing, bonuses, and profitability over time. For insurers, the challenge is to grow without letting acquisition costs run too high.

At the same time, insurers are slowly testing newer ways of reaching customers, online sales platforms, sharper data insights, and a mix of digital and in-person advice. These may make operations smoother over time, but agents are unlikely to fade out anytime soon, especially in a market like India, where many buyers still value personal interaction before making financial decisions.