As the Insurance Amendment Bill passed by Parliament caps agents’ commissions policyholders will benefit because incentives shift from volume-driven sales to needs-based advice. It will help reduce policy lapses and claim disputes over time.
The cap on commission is an important consumer-protection measure which will enable competitive pricing of insurance policies.
Higher penalty
By giving the regulator greater authority—such as the ability to regulate commissions, disgorge wrongful gains, and impose higher penalties—the Bill creates a stronger framework to deter mis-selling. The creation of a policyholders’ education and protection fund recognises that informed consumers are critical to reducing mis-selling over the long term.
The regulator can now disgorge wrongful gains made by insurers or intermediaries and impose much higher penalties—from Rs 1 crore to Rs 10 crore for violations. “This improves deterrence against mis-selling, unfair practices, and non-compliance,” says Shilpa Arora, co-founder and chief operating officer, Insurance Samadhan.
The cap on commission is a step towards a healthier and more customer-friendly insurance market.
Premiums are driven by several factors—claims experience, medical inflation, reinsurance costs, solvency requirements, and regulatory norms. Commissions are only one part of the cost structure.
“Better capital availability, disciplined commission structures and improved operational efficiency will create the right conditions for more competitive pricing over time,” Rakesh Goyal, director, Probus, an insurance broking firm.
By granting wider regulatory powers, higher monetary penalties, and explicitly extending liability to directors and senior management, the Bill is designed to make governance and sales practices materially more disciplined.
“Over time, this is likely to drive greater internal oversight, tighter governance around sales practices, and more disciplined product distribution — thereby curbing mis-selling and strengthening policyholder interests,” says Harsh Khemka, partner, Khaitan & Company.
Clearer distribution norms, rational commission limits and a dedicated policyholder education fund collectively will help raise standards. These reforms will empowers customers with better awareness while encouraging insurers and distributors to focus on suitability rather than short-term sales.
The Bill enhances clarity at the point of sale as only regulated entities can use terms like “insurance” or “assurance”, helping consumers clearly identify genuine insurers and reducing confusion caused by look-alike financial products.
More choice
Allowing 100% foreign direct investment will strengthen reinsurance capacity, solvency and claim-paying ability of insurers. For policyholders, stronger capital means greater reliability, especially during large health claims or catastrophe losses. Increasing the FDI cap will result in more choice, smarter products, quicker claims and a significantly improved service experience.
It strengthens consumer protection — streamlined onboarding, explicit confidentiality and security obligations for policyholder data. Moreover, a robust policy and claims recordkeeping will improve governance and transparency.
With 100% FDI, individuals can get better-designed products aligned to real risks. Global insurers can bring advanced underwriting and risk-pricing models. This can lead to more personalised premiums based on health behaviour, preventive care, or usage patterns—rather than one-size-fits-all pricing.
Globally, insurers bundle coverage with diagnostics, early screening, chronic care management, and mental health support—shifting the focus from only hospitalisation to health maintenance. Experts say insurers can launch stronger preventive and wellness-linked products, especially in health insurance.
The creation of a Policyholders’ Education and Protection Fund acknowledges the need for better insurance awareness and consumer confidence, which is essential for long-term inclusion.
However, the Bill does not directly reform claim timelines, rejection standards, or policy wording. “Those improvements will depend on future regulations and how effectively the Insurance Regulatory and Development Authority of India enforces its expanded powers,” says Arora.
With a stronger capital backing and smarter cost controls, insurers will be better positioned to offer well-priced policies for individuals.