IRDAI intermediary reforms: From periodic renewals to continuous supervision

The Amendment Regulations introduce an annual supervisory fee equal to the higher of INR 10,000 or 0.04% of the aggregate commission and “other receipts” from insurers in the preceding financial year.

This changes how intermediaries bear regulatory costs. Instead of a predictable, periodically recurring fee, they will now incur an annual supervisory fee linked to the scale of their business and value of their relationship with insurers.

The scope of the fee base is also broad and is not limited to commissions but extends to “other receipts” from insurers, including payments for branding, marketing, display fees, claims consultancy, risk management and shared services. This could potentially capture cost reimbursements and cost-to-cost intra-group allocations that do not have any commercial consideration element.

The Amendment Regulations reflect the direction that IRDAI intends to adopt beyond the present regulations. Commissions are currently regulated by the IRDAI (Expenses of Management, including Commission of Insurers) Regulations, 2024, using a narrow definition. The broader approach in the Amendment Regulations looks to capture the full economic value flowing between insurers and intermediaries and does not differentiate between commission for insurance sales and other receipts from non-insurance related transactions. It remains to be seen whether a corresponding amendment to the commission framework will follow to align with this approach.

The all-encompassing definition of “other receipts” covers branding, marketing, advertising, publicity and promotional activities, such as web branding, branch branding, display fees, logo fees and similar brand visibility initiatives. It also includes business support and shared services costs and fees for claims consultancy, risk management and other similar services. Effectively, the definition captures all economic value flowing from insurers to intermediaries, regardless of the legal structure. This definition risks capturing pure cost-reimbursements and cost-to-cost intra-group allocations and may require further clarification as the framework is implemented.

The Amendment Regulations replace the existing three-year registration renewal process with a framework under which an intermediary’s registration continues to remain in force indefinitely, subject to continuous compliance with the applicable regulatory requirements, payment of the prescribed annual fee and unless suspended, cancelled or surrendered.

Under the existing framework, the renewal process served as a recurring checkpoint at which intermediaries demonstrated ongoing compliance with registration conditions. The revised framework dispenses with this periodic review and instead relies on continuous disclosures, enhanced reporting obligations and stronger enforcement powers to monitor compliance throughout the intermediary’s lifecycle.

Existing intermediaries holding registrations issued under the earlier three-year validity framework must apply for a fresh certificate of registration by 31 January 2027. Applications may be submitted up to 31 March 2027 upon payment of the prescribed additional fee. Intermediaries that do not complete this transition within the prescribed timeline will be required to seek fresh registration under the applicable regulation.

This transition should be treated as an immediate compliance priority. Intermediaries should identify their legacy registration certificates, confirm the applicable transition timelines, assign responsibility across the legal, compliance and operations teams, and ensure that applications for fresh registration certificates are filed within the prescribed timelines to avoid any disruption to their regulated activities.

Under the renewal-based regime, intermediaries often treated the renewal exercise as an opportunity to identify and rectify historical compliance gaps before approaching the regulator. A perpetual registration framework removes this natural compliance milestone. Instead, regulatory scrutiny can arise at any time, requiring boards to maintain stronger real-time oversight rather than relying on periodic remediation exercises.

Intermediaries may therefore need to reorient their compliance frameworks towards continuous monitoring, periodic internal audits and stronger board-level reporting to ensure that regulatory lapses are identified and addressed before they crystallise into enforcement action.

The Amendment Regulations require intermediaries to maintain records of all policies solicited through them, including the name and functional identity of the relevant Broker Qualified Person (BQP), Specified Person (SP) or Point of Sales Person (POSP) responsible for the solicitation or servicing of the policy. The functional identity must be assigned based on a unique identity number issued by the central government. These details must be reflected in the proposal form, policy document and certificate of insurance. The tagging requirements will become effective from 1 January 2027.

Traditionally, regulatory accountability has been directed at the intermediary as an institution. The revised framework introduces an added layer of individual accountability by enabling the IRDAI to identify the specific individual associated with every policy issued. This enhanced traceability would allow instances of mis-selling or other conduct failures to be linked directly to the responsible individual, creating a comprehensive regulatory trail that follows BQPs, SPs and POSPs across employers. The framework looks to assign responsibility at the point of sale rather than treating misconduct solely as an institutional failure.

Intermediaries will need to assess their onboarding, point-of-sale and policy administration systems to ensure that the prescribed identification details can be accurately captured and maintained from the implementation date.

The Amendment Regulations also introduce recurring training requirements for certain intermediary categories. Principal Officers (PO) and SPs of corporate agents, POs and Insurance Sales Persons of insurance marketing firms, and POs and Authorised Verifiers of insurance web aggregators are now required to undergo prescribed training at least once every three years. This will require intermediaries to update their compliance calendars and training governance frameworks to ensure timely completion and appropriate documentation of the prescribed training.

The Regulations also require intermediaries to maintain records in a manner that enables the IRDAI to access them remotely. Intermediaries should therefore also assess their record-management and data governance systems for readiness to meet remote-access requirements.

The Amendment Regulations revisit the governance framework applicable to insurance intermediaries with majority foreign ownership. They omit the requirement to obtain prior IRDAI approval for dividend repatriation and remove the cap restricting related-party payments to 10% of total expenses. In place of these ex-ante controls, the Amendment Regulations set up a governance framework centred on board oversight and enhanced transparency.

Intermediaries with majority foreign shareholdings, as well as intermediaries earning commission exceeding INR 10 crore in a financial year, are required to disclose details of commission earned, RPT, profits and dividends declared and paid in the manner prescribed by the IRDAI and publish those details on their websites. By extending these requirements beyond foreign-owned intermediaries to larger intermediaries meeting the prescribed commission threshold, the Regulations significantly broaden the scope of entities subject to enhanced transparency obligations.

By shifting from transaction-level approvals to governance through disclosures, the regulator appears to be placing greater reliance on board accountability, regulatory reporting and public transparency to ensure prudent conduct. The reforms reflect a broader move away from pre-approval-based oversight towards governance-driven supervision.

While the new framework offers greater operational flexibility, it also creates new governance and disclosure challenges. Public disclosure of detailed RPTs and financial metrics could expose commercially sensitive intra-group arrangements, including technology licensing, intellectual property charges and shared-service pricing, to competitors. For multinational insurance groups, the commercial implications of this transparency may extend beyond regulatory compliance and influence how group functions and services are structured in India.

The Amendment Regulations complement this governance-led approach by strengthening the enforcement framework.

The Amendment Regulations emphasise the need for continued reporting and information-furnishing responsibilities of various intermediaries. Corporate agents, brokers, insurance marketing firms, and web aggregators must provide accurate and complete regulatory returns, reports, and other information requested by the IRDAI. Failure to do so will result in penalties under Section 102 of the Insurance Act, 1938 (Insurance Act).

Although the Amendment Regulations do not create a separate penalty regime, they strengthen the IRDAI’s enforcement framework by linking ongoing reporting and information-furnishing obligations to the enhanced penalty provisions introduced under the Insurance Act.

Viewed together, these reforms materially increase both the likelihood of regulatory intervention and the financial consequences of non-compliance. Regulatory breaches that may previously have escaped detection until a renewal exercise or inspection are now more likely to be identified through continuous supervisory mechanisms.

For boards and senior management, compliance therefore becomes a strategic governance issue rather than a periodic regulatory exercise. Internal controls, compliance monitoring and escalation mechanisms should be reviewed to ensure they are proportionate to the enhanced enforcement environment.

The increase in potential regulatory exposure also has implications for risk transfer arrangements. Existing Professional Indemnity (PI) and Directors’ and Officers’ (D&O) insurance policies may not have been structured with penalties of this magnitude in mind. Intermediaries should review these policies to assess whether existing policy limits and coverage remain proper, considering the evolving regulatory framework.

The significance of the expanded disclosure framework extends beyond foreign ownership-related supervision. By applying the transparency requirements to intermediaries earning commissions exceeding INR 10 crore in a financial year, the requirements capture a broader segment of the intermediary market and bring a wider category of privately held intermediaries within the scope of public financial and governance disclosures.

While greater transparency is consistent with the IRDAI’s supervisory objectives, it may also alter competitive dynamics. Disclosure of financial performance and intra-group commercial arrangements could provide competitors with insights into pricing structures, shared-service models and technology arrangements that have traditionally remained confidential.

The Amendment Regulations require insurance brokers to provide an undertaking confirming compliance with the Consumer Protection E-Commerce Rules and the Central Consumer Protection Authority Guidelines for Prevention and Regulation of Dark Patterns (CCPA Guidelines). The undertaking also requires brokers to confirm that their digital interfaces and customer communication channels have been assessed for compliance with such requirements.

The undertaking has been introduced only within the regulatory framework applicable to insurance brokers. However, the consumer interface risks that the CCPA Guidelines seek to address, such as deceptive prompts, misleading interfaces, forced actions and manipulative digital design, are not unique to brokers. Corporate agents, web aggregators, insurance marketing firms, and other intermediaries increasingly rely on digital platforms, online solicitation journeys, and technology-enabled customer interactions, which may present similar consumer protection concerns.

While the requirement currently applies only to brokers, it may indicate closer regulatory scrutiny of digital consumer interfaces across the wider insurance intermediary ecosystem.