It was only last year i.e. in 2023, that the Insurance Regulatory and Development Authority of India (“IRDAI”) had completely rehauled the regime applicable to payment of commissions by insurers. Departing from a product-based commissions regime, the IRDAI introduced a regime which allowed insurers to determine the commissions payable to agents provided that they were within limits of expenses of management (“EoM”) prescribed for insurers. This regime was set out in the IRDAI (Expenses of Management of Insurers transacting Life Insurance Business) Regulations 2023, the IRDAI (Expenses of Management of Insurers transacting General or Health Insurance Business) Regulations 2023 and the IRDAI (Payment of Commission) Regulations 2023 (“Previous Regulations”).

The IRDAI has now notified the IRDAI (Expenses of Management, including Commission, of Insurers) Regulations, 2024 (“New EoM Regulations”), which replaces the Previous Regulations. The New EoM Regulations have been notified to simplify compliance and provide a consolidated framework to govern EoM, including commissions, by insurers. No substantial changes have been introduced in the New EoM Regulations when compared to the Previous Regulations, and the key principles remain as follows:

1. Rewards, remunerations and commissions subsumed under a single concept of commissions.
2. No limits on product-level commissions. The amount of commissions is to be determined by each insurer within the overall cap on EoM.
3. The limits on EoM for general insurers and health insurers are set as an overall limit based on the gross written premium in a financial year, set at 30% for the general insurance business and 35% for the health insurance business. The EoM limit for life insurers is at a segmental-level and with an increase in the EoM limits for some segments.

For a detailed update on the Previous Regulations, please see our previous alert here.

Authors: Kunal Thakore – Joint Managing Partner; Deepa Christopher – Partner, Chhavi Singhal – Senior Associate & Pranav Kandada – Associate