Service Is the New Commission
What the reported reform means for advisors
IRDAI is reported to be preparing the biggest change in decades to how insurance sellers are paid. Here is what has been reported, the numbers underneath it, and what it means — for the industry, for advisors, and for policyholders.
What has been reported
On 3 July 2026, Reuters reported that IRDAI plans to propose spreading distributor commissions across the life of a policy, instead of paying most of it upfront. A draft framework is expected within four to six weeks of that report, and IRDAI chairman Ajay Seth has said publicly that a distribution reform consultation paper could come by the end of July.
Two reported details matter most. First, commission may be linked to the work of selling and servicing: a seller who gives face-to-face advice, helps with paperwork, and stands with the customer during a claim could earn more than a channel that sells policies as an add-on. Second, caps by product type, tenure and complexity, with clearer disclosure of what distributors are paid.
The signs were there for months. Cafemutual reported in March that the regulator was discussing the phase-out of high upfront life commissions to improve persistency, and on 1 July that both trail-style and capped structures were on the table.
The background explains why. On some life and health products, distributors earn up to 40% of the premium, most of it upfront (industry executives, via Reuters). In life, the skew is on record: 25–40% of the premium as first-year commission, and only about 5–7.5% on renewals (IRDAI Annual Report). The system pays many times more for the sale than for the keeping.
The numbers underneath
The keeping is exactly where India leaks. At LIC, only 64.87% of policies survive the first year, and 46.88% reach the fifth — down from 50.31% a year earlier (FY26 results, policies basis). The agents' own association has told the government that only 65–75% of retail health policies get renewed. More than half the vehicles on Indian roads run without insurance, led by two-wheelers — and every one of those vehicles was insured on the day it was sold. What failed was the renewal.
India's stated goal is Insurance for All by 2047. The country cannot get there by selling alone if a third of the policies leak out the back every year. Keeping India insured is service work — and that is the direction every recent move points: the commission review, GST on individual health and life premiums cut from 18% to zero (from 22 September 2025), and IRDAI's cap on senior-citizen health premium hikes at 10% a year.
For the industry
Distribution economics move from volume to quality. If payouts follow the life of the policy, persistency stops being a compliance disclosure and becomes the currency of distribution. Channels that only complete transactions lose ground to channels that keep customers. Expect the consultation paper to be argued hard on caps, tenure linkage, and disclosure — and expect insurers to start asking a new question of every channel: not how much did you sell, but how much of it is still alive.
For advisors
Read the reported model closely, because the fear headline and the true headline are different. The fear headline is “commissions cut.” The truer headline is “commission moved to where the service is.” As reported, this is not a pay cut for the advisor who serves: the payout spreads across the years the policy stays alive, and the model reportedly pays more to the one who services. The advisor who keeps customers stands to earn the same, or more. The one who loses is the advisor whose customers lapse.
What to do now, before the paper lands: treat persistency as your income statement — every lapsed policy is renewal commission that stops. Tighten renewal follow-up across every line you service, your own policies and the ones you lost. Be findable — when a referred customer searches your name before calling, make sure something verifiable answers. And when the consultation paper opens for comments, read it and respond. It is your income being redesigned; your voice belongs in it.
For policyholders
Your advisor's income will increasingly depend on serving you after the sale — renewal reminders, claim support, reviewing your cover as your life changes. That is good news. With GST on individual premiums now zero and senior-citizen hikes capped, the direction of the whole system is the same: cover should be affordable, and service should count. Expect more from your advisor. It is how they will be paid.
What happens next
The consultation paper could come by the end of July, with a draft framework in the weeks after. Until the paper is out, everything above is reported proposal, not final rule. The day it is released, we will publish a plain-language breakdown of what it actually says — for the industry, for advisors, and for policyholders.
Sources: Reuters, 3 July 2026 (carried by Economic Times and Business Standard); Cafemutual, 4 March and 1 July 2026; LIC press release, 21 May 2026; IRDAI Annual Reports 2024 and 2024-25 (commission structure, agent counts, as reported by Deccan Chronicle and others); Confederation of General Insurance Agents' Associations' 2024 letter, via Business Standard; IIB Motor Annual Report and IRDAI public statements; GST Council decision of 3 September 2025, notified by the Ministry of Finance.
This article explains reported developments. It is not legal or financial advice. As of 19 July 2026.
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Zaap Pulse tracks regulatory developments for the people who distribute insurance in India. Advisors: your free professional profile is on ZaapIn.