Irdai’s cap comes with an advantage for these players

Nifty22, 832.25-308.25. Motilal Oswal Midcap Fund Direct-Growth.

Key points

• (Catch all the Business News, Breaking News and Latest News Updates on The Economic Times.).
• Under the proposed norms, Irdai intends to lower the company-level expense of management (EoM) limit for general insurers to 20% of gross direct premium income over five years.
• The Economic Times daily newspaper is available online now.
• Smaller life and general insurers worry that proposed distribution reforms might benefit larger insurers disproportionately.
• Smaller insurers fear that an aggregate company-level cap could affect them disproportionately since their businesses are more heavily weighted towards retail policies.

Nifty22, 832.25-308.25. Motilal Oswal Midcap Fund Direct-Growth. The Economic Times daily newspaper is available online now. Major insurers, bigger advantage? Smaller players flag Irdai's new expense caps. Major insurers, bigger advantage? Smaller players flag Irdai's new expense caps. ET OnlineLast Updated: Sep 28, 2026, 12: 14: 00 PM IST.

Smaller life and general insurers worry that proposed distribution reforms might benefit larger insurers disproportionately. The changes include lowering expense management limits for both life and general insurers. Smaller insurers are concerned that the aggregate expense cap could limit their competitive ability in retail insurance. Larger insurers may leverage their economies of scale to manage costs more effectively.

As firms with sizeable group businesses may be better placed to absorb costs within the proposed expense limits, smaller life and general insurers are concerned that the Insurance Regulatory and Development Authority of India's (Irdai) proposed distribution reforms could offer larger players an advantage, Times of India noted. Under the proposed norms, Irdai intends to lower the company-level expense of management (EoM) limit for general insurers to 20% of gross direct premium income over five years. For life insurers, the cap is proposed at 15% in two years, followed by 12.5% or 10% over five years.: Irdai proposes major changes to insurance commissions; businesses, agents may feel the pinch.

Smaller insurers fear that an aggregate company-level cap could affect them disproportionately since their businesses are more heavily weighted towards retail policies. Retail insurance typically involves higher acquisition and underwriting costs as well as larger distributor payouts, leaving less headroom within an overall EoM ceiling. "The council will discuss the new norms before submitting feedback to the regulator, " the CEO of a general insurer outside the top 10 informed Times of India. Live Events.

In practice, a similar concern was raised by the CEO of a smaller life insurance firm. This person stated the proposed framework could potentially push the industry back towards practices seen before 2023, when commission caps were in place and distributors were offered incentives through mechanisms such as expense reimbursements and marketing backing. Sizeable insurers, by comparison, may be able to apply the scale of their group business to keep their overall expense ratios lower. Group insurance generally involves lower acquisition and servicing costs, allowing insurers to generate substantial premium volumes at relatively low expense ratios. For instance, a life insurer with Rs 10, 000 crore of group business and a 4% expense ratio could employ that lower-cost premium base to offset higher expenses incurred on individual policies while still remaining within an aggregate EoM cap. Meanwhile, the example is illustrative of how a larger group book could provide greater flexibility under a company-wide expense ceiling.: Irdai proposes ban on insurance website 'dark patterns', seeks lower distribution costs Smaller insurers argue that this could allow larger players to retain greater room for distributor payouts while additionally spending on technology and marketing. They fear this could strengthen the ability of sizeable insurers to compete for bank tie-ups and relationships with substantial broker networks. The concern centres on the absence of separate expense sub-limits for group and retail businesses. Smaller insurers say a company-wide cap could allow players with sizeable group books to apply their economies of scale to absorb the higher costs associated with retail distribution. Notably, the industry is now projected to examine the proposed norms before submitting its feedback to Irdai. For smaller insurers, the key matter will be whether the new aggregate EoM limits create a level playing field throughout insurers with significantly different business mixes and cost structures. (With inputs from Times of India) Add Now!

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In short, irdai's cap comes with an advantage for these players is the central thread here, and readers can expect follow-up reporting as the picture becomes clearer.