The agents’ body has proposed commission rates of up to 35% for policies with premium-paying terms of 15 years and above, opposed clawbacks on alleged mis-selling and sought equal scrutiny of banks and other distribution channels.
The Life Insurance Agents’ Federation of India-1964 (LIAFI) has written to the Insurance Regulatory and Development Authority of India (IRDAI), seeking a higher commission structure for individual insurance agents as the regulator considers sweeping reforms to insurance distribution, including changes to commissions and safeguards against mis-selling.In its October 15 letter to the IRDAI chairman, LIAFI proposed first-year commissions of 27% for policies with premium-paying terms of five to nine years, 30% for terms of 10–14 years and 35% for policies with terms of 15 years and above. It has also sought renewal commissions of 7.5% from the second to the sixth year and 6% from the seventh year until policy maturity.
The federation said the proposed structure should recognise agents’ long-term servicing responsibilities and rising business costs, while ensuring that individual agents remain financially viable. It also urged the regulator to protect agents’ livelihoods and ensure that distribution reforms do not weaken the agency network that serves rural, semi-urban and underserved markets.
“The national objective of ‘Insurance for All’ cannot be achieved without a strong, experienced and financially sustainable agency force capable of reaching customers personally, explaining insurance products and providing continuous assistance throughout the policy term,” LIAFI said in its letter.
LIAFI flags commission disparity, LIC agents’ earnings
The federation said individual agents have faced pressure on their earnings even as the costs of providing insurance services have risen. It cited travel, communication, digital services, office maintenance and customer meetings among the expenses agents incur while acquiring and servicing policies.
LIAFI’s letter also noted that the average monthly commission earned by an LIC agent was approximately ₹16,774 and that LIC’s commission expenditure had declined to 4.55% in FY26. It also claimed that around 93% of LIC’s life insurance business was generated through individual agents.
The body raised concerns over differences in payouts across distribution channels following the removal of prescribed maximum commission limits in 2023. It said commissions on certain LIC policies were reportedly reduced to as low as 7% from October 2024, while some private insurers continued to offer substantial payouts to corporate agents, banks and brokers.
It has asked IRDAI to ensure a fair and transparent framework that recognises the contribution of individual agents, including through adequate renewal commissions for services provided throughout a policy’s term.
Agents oppose clawbacks on alleged mis-selling
LIAFI has strongly opposed the proposed recovery of commissions from agents over alleged mis-selling or misinformation. It said commissions should not be clawed back merely because a policyholder files a complaint, cancels a policy, surrenders it or allows it to lapse.
The federation has argued that allegations should be investigated through a transparent and impartial process, with agents given an opportunity to submit explanations and supporting evidence. It also said responsibility for mis-selling should not automatically fall on individual agents when institutional sales practices, product complexity or deficiencies in insurers’ systems may have contributed.
“Commission clawback should not be automatic or imposed solely on the basis of a complaint, policy surrender, lapse or cancellation,” LIAFI said, recommending that the proposed clawback provision be excluded from the framework.
The federation also cautioned against using persistency as the sole criterion for assessing agents or reducing their remuneration. It said lapses can result from policyholders’ financial difficulties, unemployment, medical emergencies, changing needs or inadequate servicing, and argued that accountability should be based on the actual reasons for a policy lapse.
Seeks equal scrutiny of banks, brokers over mis-selling
The agents’ body has also called on IRDAI to strengthen oversight of corporate agents, banks and insurance brokers, alleging that mis-selling is not limited to individual agents.
It cited instances in which customers applying for home, personal, vehicle and business loans may be led to believe that purchasing insurance is mandatory for loan approval or disbursement, even when it is not a regulatory requirement.
LIAFI has sought clear disclosure that insurance purchases are voluntary wherever applicable, along with safeguards to ensure customers provide informed consent. It said regulatory scrutiny should extend equally across distribution channels rather than focusing predominantly on individual agents.
The federation has also opposed the proposed disclosure of individual commission details on insurers’ websites, arguing that it could lead policyholders to demand part or all of the commission earned by agents. It said transparency should apply uniformly to insurers’ other expenses, including employee salaries, allowances and benefits.
LIAFI has urged IRDAI to consider these concerns while finalising the distribution reforms, arguing that a financially sustainable agency force is essential to expanding insurance awareness and coverage across the country.