According to RBI data, In the general insurance segment, public insurers show a stable but elevated expense base. Operating expenses, after moderating in 2024-25, rose sharply again in 2025-26
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SHASHANK PARADE
The commissions being paid by the private insurers in the life and general insurance sector have shown a sharp rise and pose an increasing risk of mis-selling in insurance, according to the Reserve Bank of India (RBI).
While the public insurers had shown restraint in hiking the commissions from time to time, private insurers were ‘aggressive’ in offering hikes and a ‘distinct divergence’ in cost structure is evident between public and private insurers, the RBI said in its latest Financial Stability Report (FSR).
The private life insurers had registered commission ratio surge of almost two times in 2025-26 from 2021-22, alongside a stable operating expense ratio. This escalation in distribution costs significantly outpaces private sector premium growth, compressing net margins and raising the risk of acquisition-cost-driven mis-selling.
In the general insurance segment, public insurers show a stable but elevated expense base. Operating expenses, after moderating in 2024-25, rose sharply again in 2025-26, according to RBI data.
The commission ratio has increased marginally for public insurers over the last 5 years. ”At the same time, private insurers’ commission expense ratio rose sharply, materially outpacing premium growth. This high cost of distribution for both public and private insurers acts as a structural drag on underwriting margins, which are already negative across much of the sector,” the RBI said.
IRDAI MOVE
The Insurance Regulatory and Development Authority of India (IRDAI) has been cautioning the insurers on higher expenses including the commissions.
Recently, IRDAI amended the (Corporate Governance for Insurers) Regulations, linking the variable pay and incentives of CEOs, MDs, and Key Management Personnel (KMPs) directly to policyholder outcomes and customer satisfaction rather than just sales and profit margins.
According to sources, the insurance regulator is expected to bring new norms to rationalise commission structures as part of its overhaul of supervisory framework post the amendments to the Insurance Act by the Centre.
While a few insurers contacted by businessline, declined to comment on concerns on higher commissions, one of the leading broking houses said ‘there was no unnatural growth’ in commissions and it is in line with the industry growth.
Published on July 6, 2026
