Should Insurance Buyers Know What Their Agent Earns Before They Buy?

When an insurance agent recommends a policy, the buyer can see the premium and the promised benefits. The payment the insurer will make to the seller is usually harder to find. For many buyers, that missing figure matters: it could help them judge whether the recommendation is driven by their needs or by the payout attached to the sale.

In a LocalCircles survey, 86 per cent of respondents said they had not been told what commission their agent or distributor would receive. Only three per cent said they had been fully informed. Asked what should happen before a purchase, 82 per cent wanted insurers to disclose the commission on every policy. A further six per cent favoured disclosure for life and health policies.

What The Survey Tells Us

The survey drew more than 94,000 responses across four questions from insurance buyers in 322 districts. Each question received around 23,000–24,000 responses. Participants were registered users of the LocalCircles platform, so the findings describe the views of those surveyed, rather than a measured share of all insurance buyers.

Their concern extends beyond the undisclosed payment. Half the respondents said agents or distributors had frequently recommended a policy without clearly explaining why it suited them; another 24 per cent said this had happened sometimes. The survey does not establish why any particular recommendation was made. It does show why buyers want to see the incentive alongside the advice.

Knowing the commission would give a buyer a useful question to ask: why is this policy preferable to another with similar cover but a different payout to the seller? The answer still depends on the policy’s terms, exclusions, waiting periods, and claims service. A higher commission alone does not prove that the cover is unsuitable.

What Irdai Has Proposed

Irdai’s September consultation paper seeks to change how insurance distributors are paid and monitored. It proposes commission limits that vary by product and sales channel, taking account of the work involved in selling and servicing a policy. It also proposes tighter limits on insurers’ expenses.

On disclosure, the proposal calls for insurers and large distribution entities to make their commission policies and structures available in simple, accessible language. Certain commercial insurance policies would carry commission disclosures. That could help buyers understand how a seller is generally paid.

There is, however, a distinction between seeing a commission structure and being told the amount payable on the policy in front of you. The proposals, as described in the consultation, do not clearly establish that every retail buyer would receive that policy-specific figure before agreeing to purchase. This is the gap highlighted by the survey. LocalCircles has called for the amount to be shown both in rupees and as a share of the premium.

Irdai has also proposed measures aimed at sales conduct, including identifying the individual seller on a policy, making information about mis-selling public and recovering commissions where mis-selling is established. These measures may improve accountability after a sale. They do not, by themselves, give a buyer the commission figure at the point of decision.

Would Disclosure Lower The Premium?

Commission is one cost within an insurance premium. Claims, medical and repair costs, administration and other expenses also affect the price. Making a commission visible would help a buyer assess the recommendation, but would not automatically reduce the premium.

The survey’s question on caps was conditional: 71 per cent said they would support limits if these helped lower premiums. Another 19 per cent supported them only if service quality did not suffer. Those answers should not be read as evidence that a cap will produce cheaper cover.

For buyers, the practical test is what they can compare before paying. They can ask the seller how they are paid, request an explanation of why the recommended policy fits their needs, and compare it with other policies on cover and exclusions as well as price. Whether insurers must disclose the exact commission on each retail policy remains a decision for Irdai after the consultation, which is open until October 25, 2026.

FAQs

1. Must an agent tell me their commission before I buy?
You can ask, but Irdai’s proposals do not clearly require disclosure of the exact commission on every retail policy before purchase.

2. Does a higher commission mean the policy is unsuitable?
No. Ask why the policy meets your needs, then compare its cover, exclusions, waiting periods, and price with other options.

3. Will commission caps reduce my premium?
Not necessarily. Claims and other costs also affect premiums, and Irdai’s proposed caps are still under consultation.