Standalone health insurers have asked the Insurance Regulatory and Development Authority of India to change the IRDAI expense caps in its management-cost proposal. Industry representations on 30 October 2026 say specialised health insurers want mandatory lines left out. The lines named are motor third-party cover, crop insurance and government-sponsored health schemes. The insurers argue that folding those lines into one calculation puts firms selling only health cover at a disadvantage against multi-line general insurers.
The request lands in the middle of a wider consultation. On 23 September 2026, the regulator published a consultation paper titled “Recalibrating Economics of Insurance Distribution”. The paper proposes commission caps by product and channel, with expense ceilings tightening over five years from 2027-28. The feedback deadline was extended from 25 October to 31 October 2026, with more than 650 comments received, reports say.
What IRDAI expense caps would change
Under the 2024 framework, general insurers face a cap of up to 30 per cent of gross premium written in India, and standalone health insurers a ceiling of up to 35 per cent. The proposed IRDAI expense caps would phase out that gap. General insurers would move from 30 per cent to 25 per cent within two years and to 20 per cent within five years, and standalone health insurers from 35 per cent to 30 per cent on the way to a common ceiling.
The paper also changes the base for the cap. Expense allowances now scale against gross written premium, which includes inward reinsurance premiums accepted from other carriers, while the proposal shifts the base to gross direct premium income, which leaves inward reinsurance out. That shrinks the denominator, so the cash limit tightens even before the percentage cuts take effect. Product-specific commission caps would sit on top of the IRDAI expense caps. For individual health cover, reported figures are 15 to 20 per cent on a first sale and 5 to 10 per cent on renewal or porting.
Why standalone health insurers object
The objection turns on business shape. General insurers sell motor, fire, marine, commercial and farm cover alongside health policies. Standalone health insurers sell medical cover for individuals, families and employer groups, and little else. Nilesh Kambli, chief financial officer of Star Health Insurance, said in industry representations that mandatory lines and subsidised mass programmes do not need the intensive distribution or retail marketing that consumer health policies demand. Pooling low-distribution-cost policies into the calculation creates an artificial baseline, he argued.
General insurers can offset higher health distribution spending against large volumes of mandatory motor or crop cover that carry small agent commissions, the insurers argue. Standalone firms have no such buffer, and they say the IRDAI expense caps therefore compare unlike businesses. Their branch networks and field teams counsel families through waiting periods, pre-existing condition clauses, co-payments and sub-limits.
The Insurance Brokers Association of India wrote to Prime Minister Narendra Modi on 2 October 2026, cautioning that the reforms would cost jobs, growth and competition. IRDAI chairman Ajay Seth said he was in listening mode on the IRDAI expense caps consultation. He cited average health insurance commission of about 24 per cent across new and renewal policies and said bringing it down to 15 to 20 per cent would leave more in the risk pool.
What IRDAI expense caps could mean for policyholders
No final rules have been announced, so the immediate effect on policyholders is limited. In theory, lower administrative and acquisition costs should free up money and slow premium rises. Premiums also respond to hospital charges, clinical advances, age-related illness and medical inflation, which frequently runs in double digits. Tighter IRDAI expense caps may slow premium growth, but the reporting does not suggest they would reverse it.
Distribution is the second pressure point. Health cover is an advice-driven purchase, and buyers often need guidance on waiting periods and exclusions. A Redseer Strategy Consultants report published on 30 October 2026 said commission limits must be calibrated so cover keeps expanding, especially among first-time customers. Redseer said those customers are among the costliest to reach and serve. The report also noted that 95 per cent of retail premiums are sold through agents and brokers. Tighter commissions under the IRDAI expense caps could push some intermediaries out of smaller towns or toward digital-only sales.
The regulator’s annual report for 2024-25 shows gross commission expenses across non-life insurers totalling 47,266 crore rupees, including 7,365 crore rupees for standalone health insurers. Operating expenditure across all non-life insurers fell 2.18 per cent in the year. Fifteen non-life carriers breached statutory expense caps in 2024-25 and applied for regulatory forbearance. The IRDAI expense caps now under debate will be settled after the regulator weighs the feedback received by 31 October, and the final rules will show how far the ceilings move from the draft.