IRDAI Issues New Commission Rules for Group Health and Accident Brokers

The Insurance Regulatory and Development Authority of India (IRDAI) has recently released detailed guidelines defining commission structures for brokers and agents handling group policies. These include both health insurance and group personal accident plans. The new rules are designed to bring transparency, promote ethical distribution, and maintain a balance between fair remuneration for intermediaries and affordability for customers. For companies purchasing personal accident insurance or group health policies, understanding this structure is key to evaluating policy pricing and broker incentives.

By capping and standardising commissions, IRDAI aims to ensure that consumers receive genuine value from their insurance plans while intermediaries are rewarded appropriately for their service and expertise.

Why commissions matter in insurance

Commissions are a vital part of the insurance ecosystem. They represent the income that intermediaries—agents, brokers, or corporate agents—earn for connecting customers with insurance products. Typically, commissions are calculated as a percentage of the premium paid by the policyholder.

While commissions encourage distribution, they can also influence how insurance products are marketed. A clear and fair structure ensures that agents recommend policies that truly meet client needs, rather than those offering the highest incentives. The IRDAI’s recent move prevents excessive commissions and discourages mis-selling, protecting both individuals and businesses from being directed towards unsuitable policies.

Understanding group versus individual policies

Group insurance policies are typically purchased by companies or associations to provide collective coverage for employees or members. These plans offer simplified underwriting, broader eligibility, and cost efficiency. Premiums are generally lower compared to individual health plans because risk is shared across a large number of insured members.

In contrast, individual insurance policies cater to one person or family, with higher premiums and customised benefits. Because group policies involve collective negotiation, their commission rates are capped at lower percentages than those for individual plans.

Despite this, brokers continue to play a crucial role in designing and managing group schemes, ensuring that benefits align with employee needs and that claim processes remain smooth.

IRDAI’s framework for commissions

The regulator has set clear limits to maintain affordability and fairness across group schemes:

• Employer–employee groups: For these, commission caps are typically around 7.5%. Since the premiums are negotiated collectively and risk is distributed evenly, the distribution costs remain modest.
• Non-employer groups: These include associations, societies, or organisations where commissions can go up to 15%, reflecting the additional effort needed for administration and coordination.

In both categories, products like group personal accident insurance—which cover accidental death or disability—fall under the same regulatory limits. This uniform approach helps insurers, brokers, and policyholders operate transparently within a defined structure.

Factors determining commission levels

Several factors influence how commissions are calculated within IRDAI’s prescribed limits:

1. Policy type: A comprehensive personal accident insurance policy with wellness add-ons or critical illness riders may involve a slightly different structure than a basic plan.
2. Premium volume: Larger corporate policies naturally generate higher commission amounts in absolute terms, even when the percentage remains constant.
3. Intermediary role: Independent brokers dealing with multiple insurers may operate under more flexible commission models than tied agents.
4. Client retention: Insurers increasingly reward brokers for renewals and long-term servicing rather than just initial sales.
5. Distribution strategy: Some insurers use incentive-based bonuses for brokers who demonstrate high-quality servicing or customer retention.

Why the new rules are significant

The new commission rules serve several important purposes:

• Consumer protection: By preventing inflated premiums caused by excessive intermediary costs.
• Transparency: Ensuring that policyholders know what portion of their premium goes towards actual coverage.
• Market discipline: Encouraging ethical selling practices and discouraging mis-selling for higher profit.
• Fair remuneration: Maintaining motivation for brokers who dedicate time to client servicing, renewals, and claims support.

The structure promotes a balanced and sustainable insurance ecosystem, benefiting both customers and intermediaries.

Impact on brokers and the insurance market

For brokers, the clarified rules mean predictable earnings and reduced ambiguity. Instead of focusing on maximising commissions, intermediaries can prioritise client education and service quality. Although group commissions may appear smaller compared to individual policies, the higher volume of corporate accounts often offsets the difference.

Insurers also benefit from a more stable and professional distribution network, where the emphasis is on building lasting customer relationships rather than one-time sales.

Effect on policyholders and corporate clients

For businesses that buy group health or group personal accident policies for employees, these guidelines bring several advantages. The capped commission ensures that premiums remain affordable and that most of the payment goes directly toward coverage benefits. It also creates uniformity in pricing across the market, making it easier for companies to compare offers from different insurers or brokers.

Employers can now engage with brokers more confidently, knowing that the advice they receive is guided by fair and transparent regulations rather than high commissions.

Conclusion

The IRDAI’s revised commission rules mark a significant step towards strengthening the trust and transparency within India’s insurance sector. For brokers, it provides a clear framework for sustainable earnings, and for customers, it ensures that more of their premium goes towards genuine protection.

As insurers like Bajaj Health Insurance continue to adapt to these changes, policyholders can expect better value, clarity, and fairness in group health and accident insurance offerings. The new guidelines reaffirm that ethical distribution and consumer protection can go hand in hand, creating a healthier and more reliable insurance market for all.