Irdai Looks To Trim Commissions On Bima Sugam, Redraws Economics Of Selling Insurance

India’s insurance regulator is preparing the ground for a quieter but far-reaching change in how policies are priced and sold. As the proposed Bima Sugam platform draws closer, the Insurance Regulatory and Development Authority of India (Irdai) has asked insurers to rework commission structures for products that will be listed on it. In essence, the regulator wants insurers to understand that distribution costs on a digital marketplace will not mirror the old, agent-driven model.

At one level, while this is lowering costs, at another, it will reshape behaviour across the industry.

Why Commissions Are Under Scrutiny

For years, commissions have been a defining feature of insurance distribution. Agents and intermediaries are compensated upfront for bringing in business, and in some segments, those payouts can be substantial. While this has helped build reach in the insurance business, where insurance penetration is still evolving, it has also created distortions.

High commissions typically lead to misselling, with agents pushing for products that offer better payouts instead of simpler or cheaper alternatives.

It is this imbalance that Irdai now appears keen to address, at least on Bima Sugam. The platform is expected to host standardised products that are easier to understand and compare. In such a setting, Irdai believes steep commissions are difficult to justify.

Insurers have been told, informally, that commission levels on these products should be “significantly lower” than current norms, according to a CNBC report. The expectation is that a digital interface, with minimal human intervention, should bring down acquisition costs.

How Bima Sugam Could Change The Rules

Bima Sugam is being positioned as a common marketplace where customers can browse, compare, and buy policies across insurers. It is also expected to handle servicing and claims, turning it into a full-stack digital ecosystem rather than just a sales channel.

The broader idea is to bring insurance closer to the ease and transparency users now associate with digital payments or online investments. If multiple insurers offer similar products on a single platform, pricing and features become more visible, and competition sharper. By nudging insurers to pare them down, Irdai is effectively trying to ensure that the benefits of a digital platform are passed on to customers, not absorbed within the system.

Incidentally, the insurance industry is still working through questions around how the platform will be governed, how data will be shared, and how different stakeholders will participate.

What It Could Mean In Practice

If the regulator’s intent translates into action, the immediate impact could be a shift in how products are designed and priced for Bima Sugam. Lower commissions may create room for sharper premiums or improved benefits, though the extent of this pass-through will depend on how insurers recalibrate their costs.

For distributors, the change may push a gradual move away from upfront-heavy earnings towards models linked to service, advice, or long-term policy retention. It may not happen overnight, but the direction is becoming clearer.

For buyers, the promise is straightforward: simpler products, easier comparisons, and, potentially, better value.