IRDAI’s proposed 2% commission cap could hurt rural insurance access, warns Coverfox founder and MD Sanjib Jha
Coverfox founder and MD Sanjib Jha has raised concerns over the Insurance Regulatory and Development Authority of India’s (IRDAI) proposed 2% commission cap on loan-linked insurance, warning that the move could make it economically difficult to enrol and service borrowers in rural and underserved markets.
Jha’s concerns centre on whether the proposed cap could unintentionally undermine the last-mile distribution network needed to expand insurance coverage across smaller towns and rural India.
In an open letter to IRDAI, Jha said the regulator’s efforts to curb dark patterns, eliminate coerced bundling and improve transparency in insurance distribution were welcome. However, he argued that the proposed changes should also account for the actual cost of reaching and servicing customers in Tier-2, Tier-3 and rural markets.
“Who will enrol and service a rural borrower for ₹20, and at what quality?” Jha asked, highlighting his concern over the economics of servicing customers under the proposed framework.
Sanjib Jha says commission cuts could hurt last-mile insurance access
Jha said capping intermediary remuneration and Expenses of Management (EoM) without considering the cost of servicing underserved markets could make physical and digital outreach financially unviable.
According to Jha, the answer to high distribution costs should not simply be margin compression. Instead, he called for greater use of technology to make insurance distribution more efficient.
He said AI-driven voice and conversational workflows could help the industry reduce customer acquisition costs by 60% to 70%, while maintaining compliance and transparency. Jha argued that such technology-led automation could allow insurers and intermediaries to reduce distribution costs without weakening the infrastructure needed to reach customers in underserved regions.
He also urged IRDAI and industry stakeholders to ensure that any cost rationalisation ultimately translates into lower premiums for policyholders, rather than reducing the financial viability of last-mile distribution.
IRDAI’s proposed framework seeks to rationalise insurance distribution costs
The proposed 2% cap is part of IRDAI’s broader proposed changes to the economics of insurance distribution. The regulator has proposed product- and channel-specific commission limits, along with changes to Expenses of Management, with the stated objective of bringing down distribution costs and improving policyholder value.
The proposals also seek to address practices such as coerced bundling of insurance with loans and strengthen safeguards against mis-selling.
IRDAI released its two-part public consultation paper, “Recalibrating Economics of Insurance Distribution,” on 23 September 2026. The regulator has invited comments and suggestions from stakeholders and the public on the proposed framework until 25 October 2026. The proposals could therefore undergo changes before the final regulations are notified.
