IRDAI New Insurance Draft Guidelines 2026: The Big Picture
On September 23, 2026, the Insurance Regulatory and Development Authority of India (IRDAI) released a sweeping Public Consultation Paper proposing some of the most far-reaching changes to insurance distribution and pricing rules in recent memory. The draft guidelines target bloated distributor commissions, opaque cost structures, and barriers that have long kept many Indians underinsured.
These are still draft proposals — not yet law. IRDAI has set October 25, 2026 as the deadline for industry and public feedback. But even at the draft stage, the announcement triggered sharp stock market reactions and sparked a wide debate about what this means for insurers, intermediaries, and — most importantly — you as a policyholder.
This guide breaks down what is being proposed, how it could lower your costs, and what it means for the distribution landscape.
Why IRDAI Is Proposing These Changes
For years, critics have argued that high distributor commissions in India's insurance sector create a conflict of interest: intermediaries have a financial incentive to recommend products that pay the highest commission rather than the plan that suits the customer best. Opaque expense structures also make it hard for consumers to see how much of their money actually goes towards coverage.
IRDAI's draft guidelines aim to bring in transparency by capping commissions, tightening expense management rules, and mandating public disclosure of intermediary earnings above a certain threshold. Any intermediary earning above ₹10 crore in commission would be required to disclose that publicly — a rule designed to shine light on concentration of distribution income.
The broader goal is to make health insurance and term life insurance genuinely accessible, affordable, and trustworthy — especially for first-time buyers who currently have little way of knowing whether they are being sold the right product.
Proposed Commission Cuts: Segment by Segment
The most headline-grabbing part of the IRDAI draft is the proposed reduction in distributor commissions across every major insurance segment. The cuts are steep in some categories.
Health Insurance
Health insurance commissions paid to Intermediary Distribution Entities (IDEs) are proposed to drop from 40% currently to just 5% for new business — a structural shift in how distribution economics work. For individual agents selling to first-time buyers, the cap is proposed at 15%, down from a current 20%. Renewal and porting commissions would be capped at 5% for distribution entities and 10% for individual agents.
Motor Insurance
Own-damage (OD) motor commissions are proposed to fall from 16% to 5%. For third-party motor insurance sold via IDEs, the proposed commission is 0% — a complete elimination. If you buy car insurance or bike insurance, lower distribution costs should, over time, feed through into more competitive pricing.
Credit Life Insurance
This is where the proposed cuts are the sharpest. Credit life insurance — the cover sold alongside loans — currently sees effective commission payouts of 28%. The draft proposes capping this at 2%. Single-premium credit-life commissions, which have seen effective payouts of up to 45% through the group credit life channel and 42% through the NBFC channel, would also be capped at 2%.
Individual Life Insurance
For a long-term individual life policy (10+ year term), current commissions on a ₹1 lakh policy stand at ₹27,000. The draft proposes reducing this to ₹20,000 — a meaningful cut that affects distributor revenues on high-value life policies.
| Segment | Current Commission | Proposed Commission |
|---|---|---|
| Health (IDE, new business) | 40% | 5% |
| Health (individual agent, first-time) | 20% | 15% |
| Health (renewal/porting, agent) | — | 10% |
| Motor OD | 16% | 5% |
| Motor Third-Party (IDE) | — | 0% |
| Credit Life | 28% | 2% |
| Single-premium credit-life (effective) | 45% | 2% |
Source: Business Standard, Outlook Business, Retail Intel, Business Today — accessed September 24–28, 2026
Expense of Management Caps: Tightening the Cost Structure
Beyond commissions, IRDAI is also proposing stricter limits on the total Expense of Management (EoM) that insurers can incur. This is the broadest cost-control lever — it covers not just commissions but also operating expenses, marketing, and overheads.
For life insurers, the proposed EoM cap is 15% within two years of the guidelines taking effect, stepping down to 12.5% within five years. For general (non-life) insurers, the cap is proposed at 25% within two years, dropping to 20% at the five-year mark. Standalone health insurers, who currently operate with an EoM cap of 30%, would need to bring this down to 20% within five years.
These phased targets give insurers time to restructure — but the direction of travel is clearly towards leaner operations. A more cost-efficient insurer is, in principle, an insurer that can price products more competitively for customers like you.
Consumer Protections in the Draft Guidelines
The IRDAI draft is not only about cutting costs on the distribution side. Several provisions are aimed directly at making insurance fairer and more accessible for policyholders.
Health Insurance: Easier Access and Better Cover
IRDAI has removed the maximum entry age limit for health insurance policies — meaning older individuals can no longer be refused a policy simply because of their age. This is a significant consumer-friendly move, particularly for senior citizens who have historically struggled to find coverage.
The moratorium period — after which no insurer can reject a claim on grounds of non-disclosure — is being reduced from 96 months (8 years) to 60 months (5 years). Pre-existing disease (PED) waiting periods for retail policies are capped at 36 months (3 years).
A standard health product with a minimum basic sum insured of ₹50,000 and a maximum of ₹10 lakh is also part of the proposed framework, ensuring a baseline option is always available. AYUSH (Ayurveda, Yoga, Unani, Siddha, Homeopathy) treatments are proposed to be covered up to the full sum insured, bringing these treatments on a par with conventional hospital care.
Use our health insurance cover calculator to figure out the right sum insured for your family before you compare plans.
GST Relief Already in Effect
One significant benefit that has already passed: individual health insurance and life insurance policies became exempt from GST effective September 22, 2025, bringing the GST rate on these policies to 0%. This is a separate but complementary measure that directly reduces what you pay for cover.
Pension Policy Changes
Under the new guidelines, policyholders can now withdraw up to 60% of their pension corpus as a lump sum at maturity. Of this, 20% of the total corpus is tax-free. This gives pension plan holders considerably more flexibility than before.
Accounting Standards
Insurers are required to adopt Indian Accounting Standards from April 1, 2026, which brings greater consistency and transparency to how insurers report their financial health — helping you make more informed comparisons between providers.
To compare plans across insurers before the final rules take effect, visit our insurance comparison hub.
Market Impact: Distribution Stocks Under Pressure
The market's reaction on September 23, 2026, was swift and severe — particularly for companies whose business models depend heavily on insurance distribution commissions.
PB Fintech (the parent of Policybazaar) saw its stock crash by 32%, hitting ₹1,285.20 on the day of the announcement. Turtlemint Fintech slumped by 20% to ₹109.10.
Analysts estimate that the proposed new-business commission rate cuts amount to an effective reduction of around 10% in new-business commission income for these platforms. PB Fintech and Turtlemint are each estimated to face an earnings decline of 10–12% as a direct result of the proposed changes.
It is important to remember these are still draft guidelines. The feedback deadline is October 25, 2026, and the final rules may differ from what has been proposed. Insurance distribution intermediaries are expected to engage actively in the consultation process.
Frequently Asked Questions
What are the IRDAI new insurance draft guidelines?
IRDAI released a Public Consultation Paper on September 23, 2026, proposing major cuts to distributor commissions across health, motor, life, and credit life insurance. The draft also introduces consumer protections including no age limit for health insurance entry, shorter waiting periods, and mandatory commission disclosures. The feedback window closes on October 25, 2026.
How will lower commissions benefit insurance buyers?
When distributors earn less from pushing a particular product, the incentive to mis-sell reduces. Lower overall costs in the system also create space for insurers to offer more competitive pricing. The draft explicitly pairs commission cuts with expense-of-management caps to ensure the savings filter through to policyholders over time.
Will this affect my existing health or motor insurance policy?
Your current policy terms are not retroactively changed by these guidelines. The proposed rules affect new business and renewals going forward, once they are finalised. Changes like the removal of the age cap and shorter moratorium periods will benefit new buyers and those renewing policies under the new framework.
Why did insurance distribution stocks fall so sharply?
Companies like PB Fintech and Turtlemint derive a large share of their revenue from the commissions that insurers pay for each policy sold through their platforms. A sharp reduction in commission rates directly compresses their income. PB Fintech's stock fell 32% and Turtlemint's fell 20% on September 23, 2026, with analysts projecting a 10–12% earnings decline for both if the draft rules are adopted as proposed.
Are the IRDAI draft guidelines final?
No. These are draft guidelines open for public and industry feedback until October 25, 2026. IRDAI will review responses before finalising the rules. The final guidelines may include modifications based on the feedback received.
What You Should Do Now
The IRDAI draft guidelines represent a genuine shift in how India's insurance market could work — lower distributor incentives, tighter cost controls, and stronger consumer rights. For you as a buyer, the direction is positive: less mis-selling risk, more transparent costs, and broader access including for older buyers who were previously shut out.
While the rules are being finalised, it makes sense to review your existing cover. Check whether your health insurance plan's waiting periods and sum insured still suit your needs, or whether your term life insurance cover is sized correctly for your dependants. Use our term insurance cover calculator to check whether your current cover is adequate, and explore all insurance categories on OnePaisa to compare plans side by side.
You can also use our tax saving planner to see how your insurance premiums fit into your broader tax planning — especially relevant now that individual health and life policies are exempt from GST.
Insurance & Mutual Funds Editor, OnePaisa Editorial
Sandeep writes on insurance and mutual funds for OnePaisa — term and health cover, policy wordings and exclusions, and fund categories, costs and risk labels. Premiums, sums insured and waiting periods come from insurer policy documents and brochures; fund data comes from SEBI category definitions and scheme documents, and past returns are never presented as a forecast. His guides explain how a product works and what it excludes — they are not advice.
Work published under this byline follows OnePaisa’s editorial standards — how our guides are researched, fact-checked against primary sources, and corrected.