Future Of Agent Commission: Will IRDAI Cut Or Increase Rates?

Every insurance agent in India closely follows IRDAI (Insurance Regulatory and Development Authority of India) rules, because they directly decide how much commission agents can earn. In 2025, there is an ongoing debate — will IRDAI cut agent commissions to reduce policy costs, or will it increase flexibility to support agent growth?

This article looks at the current scenario, IRDAI’s direction, and what the future of agent commission may hold.

Current IRDAI Commission Rules (2025)

Term Insurance: Up to 35% in the first year, ~7.5% renewals.
Savings/Endowment: 30–40% first year, ~7.5% renewals.
ULIPs: 2–7% first year, 1–2% renewals.
Pension/Microinsurance: 5–20% depending on product type.

In 2023–24, IRDAI introduced “B&C (Board-approved Commission)” model, allowing insurers flexibility within set limits.

Will IRDAI Cut Commissions?

Pressure from Consumers: Lower policy costs are often demanded by policyholders and regulators.
Digital Sales Push: As online platforms grow, regulators may reduce reliance on high commissions.
Global Trends: Many markets are moving towards lower upfront commissions but higher service-linked bonuses.

Possibility: A slight reduction in high slabs (like 40% on savings plans).

Will IRDAI Increase or Maintain Commissions?

Agent-Centric Industry: 70%+ of insurance in India is still sold by agents.
Rural Penetration Need: Without strong agent income, insurers can’t expand in smaller towns.
Recent Relaxation: The 2023 reform actually gave insurers more freedom to reward agents.

Possibility: Commissions remain stable or flexible, with insurers tailoring payouts by product.

Likely Future Scenario (2025–2027)

Balanced Commission Slabs: No drastic cuts, but caps on very high payouts (35–40%) may tighten.
Shift to Performance Bonuses: Persistency and quality-of-business bonuses will matter more.
Digital Overrides: Agents using digital platforms may earn extra incentives.
Focus on Renewals: Long-term passive income will be emphasized over one-time upfront payouts.

Conclusion

In 2025, IRDAI is unlikely to slash agent commissions drastically. Instead, the trend is towards flexibility, bonus-linked earnings, and digital enablement. For agents, the future lies in building persistency-driven income streams rather than relying only on first-year cheques.