IRDAI’s Effort-Based Commission Model: A Shift Advisors Cannot Ignore

The Insurance Regulatory and Development Authority of India is exploring a change in how insurance commissions are structured, and this time, the focus is shifting from how much you sell to how much effort goes into the sale.

For years, commissions have largely followed outcomes. A policy sold meant a payout, regardless of the level of advisory, follow-up, or servicing involved. But now, with rising distribution costs and concerns around how insurance is being sold, the regulator is looking at linking commissions more closely to actual engagement.

This proposed move towards an effort-based model will reshape the industry and help the advisors earn better.

Why This Change Is Being Considered

This shift is a response to how the insurance distribution space has evolved over time. The increasing cost and the gap are the key reasons why there is a need for a better earning model in the industry.  Other reasons why this change was considered important are as follows:

1. Rising Distribution Costs

Commission payouts have been increasing steadily, often faster than premium growth. This creates pressure on insurers, which is one of the reasons why this system felt weaker over time.

2. Low Insurance Penetration Despite Growth

The insurance adoption across the country is still low. To fill this gap, there is a need for better human resources matched by proper income. Following a commission-based approach can impact this negatively.

3. Mismatch Between Effort And Earnings

Not all the advisors work in the same manner. The ones who are able to close more policies usually spend more time with clients to ensure there is a better flow. But they are still paid the same. This is not fair, and these advisors should be paid for the efforts they put in as well.

4. High Customer Acquisition Costs

Acquiring new customers has become expensive. Even with multiple channels available now, there is a need for better strategies that can ensure there are no lapses. This is where the communication vs value addition falls.

 

5. Need For Better Alignment With Customer Outcomes

Regulators are focusing more on ensuring that products are sold based on suitability. So, when you link the commission to efforts, there will be a direct impact on how the policy selling is approached.

What This Change Means For Insurance Advisors

Now, this is where things start to get practical. The change is not just about regulation. It directly impacts how you work, how you earn, and how you position yourself as an advisor.

1. Advisory Work Starts Getting Recognised

If effort becomes a factor, the advisors will spend more time explaining policy, clearing doubts, and providing support. This is work that was always there, but not always rewarded clearly.

2. Relationship-Based Selling Becomes Stronger

Advisors who focus on long-term relationships have higher chances of success in the longer run. Ongoing engagement, trust, and servicing can turn into a real earning advantage.

3. Transaction-Only Approach May Not Be Enough

If your model is built only on quick conversions, this shift may challenge that. This is when you would need to add more to your conversations and avoid just selling communication.

4. Post-Sale Service Gains Importance

Helping clients after the purchase is quite important. This can be renewal or even claims that the person needs to put in. An advisor is required to help with these, and so these should be part of income as well.

5. Clear Positioning Becomes Critical

In a system where effort is measured, you need to be clear about the value you bring. Advisors who can show their involvement and this will help them to stand out.

 

What This Means For Different Distribution Channels

This shift is not limited to individual advisors. It affects how every distribution channel operates and competes in the market. Each model may need to be adjusted based on the changes that are needed. In other words, this will look quite different for everyone in the chain.

Some of the things that will be taken into consideration for agent vs aggregator commission IRDAI are as follows:

1. Individual Agents And Advisors

Advisors who offer detailed guidance and stay involved with clients may benefit the most. Their role will now be seen as an important person in the channel, and the actual pay they deserve will be paid.

2. Bancassurance Channels

Banks that sell insurance alongside their core services may face tighter commission structures. They will need to create a plan that is now focused on low-touch points but proper flow.

3. Digital Platforms And Aggregators

Platforms that focus on speed and convenience may need to add more advisory or support layers. Only focusing on the transactions will not benefit them in the longer run.

4. Brokers And Intermediaries

Brokers who already combine advisory with product access may need to strengthen their service layer to justify higher commissions.

5. Hybrid Models

Channels that blend digital efficiency with human advisory could gain an advantage. They will be in a position where they can reach customers fast, share insights, and have the required support offered as well.

How Advisors Can Prepare For This Shift

At this stage, the model is still under discussion. But waiting for final rules may not be the best approach. The smarter move is to start aligning your way of working with where the industry is heading.

1. Strengthen Your Advisory Approach

It is no longer just selling the policies. You must focus on understanding the needs of the client and their profile as well. The more relevant your advice, the more visible your effort becomes.

2. Make Your Effort Visible

It is not enough to do the work. You need to show it. Ensure that you keep a trail of your communication to show the efforts you actually put in.

 

3. Focus On Long-Term Client Relationships

Focusing on long-term relationship building is now the key. It should be from the start to even after the policy has been sold. This will help you stand out.

4. Improve Post-Sale Service

Support clients after the purchase. Claims assistance, renewals, and policy updates are some of the areas where people actually struggle. This helps build long-term value.

5. Expand Your Product Offering

Relying on a single product may limit your growth. Working across insurance, investments, and loans can deepen client interaction and this will help you to create multiple income streams as well.

Where Platforms Like Choice Connect Fit In

As the focus shifts towards effort and engagement, the way advisors build their business also needs to evolve. Working in silos, where you offer only one product or depend on one income stream, may not be enough in the long run.

This is where platforms like Choice Connect can actually help you to stand out and build a career that lasts for a long time. Some of the key features or benefits that you will see are:

• Offer multiple financial products to deepen client engagement.
• Build advisory-led relationships that benefit you.
• Gain income stability due to multiple income streams.
• Readily available marketing options like brochures, plans, and so to share with clients for impact.
• Easy to track clients and commissions.
• Align your approach with value-driven, not volume-driven growth.

Final Thoughts

The move being explored by the IRDAI is about redefining what gets rewarded in the insurance business. For a long time, outcomes have been the primary focus. But going forward, the process behind those outcomes may start to matter just as much.

For insurance advisors, this is a moment to pause and reassess from a business perspective. How you engage with clients, help with the decision-making, and support them will be a key driver of growth.

Those who are already working closely with clients may find themselves in a stronger position. For others, this is a chance to adapt early and build a more sustainable approach. Because if effort becomes the metric, then the way you work becomes your biggest advantage.

FAQs

1. What is the difference between an insurance agent and an aggregator?

An insurance agent sells policies for one insurer. An aggregator is a digital platform. It is one where the person can find multiple insurance policies to compare and invest in the best-suited.

2. What is the difference between an insurance broker and an insurance aggregator?

A broker works independently, understands client needs, and recommends suitable policies across insurers. An aggregator actually shares the policy for the comparison. There is a need for an advisor here to make the final call.

3. What are the IRDAI rules for insurance agents?

The IRDAI requires agents to be licensed and follow compliance norms as asked to ensure that there is transparency and legit policy selling.

4. Is this effort-based model already implemented in India?

No. This is still a proposal and under consideration. A consultation paper will be shared before any plan is executed.

5. Will insurance advisors earn more under this effort-based model?

It depends on how they work. The advisors who will share detailed insights and support will definitely benefit from the same. But the advisors who follow the same process might not actually benefit.