Can transparency-led Insurance Distribution regulations be the catalyst for driving profitabili

Can transparency-led Insurance Distribution regulations be the catalyst for driving profitabili

Can transparency-led Insurance Distribution regulations be the catalyst for driving profitability in India’s General insurance sector?

How evolving regulation could improve underwriting discipline, reduce commission-driven growth, and strengthen long-term industry profitability

Portfolio-level flexibility enabled growth and innovation across the industry

The 2023 transition to a portfolio-level Expenses of Management (EOM) framework marked a significant shift in Indian general insurance regulation, giving insurers greater flexibility in managing distribution and operating expenses. This enabled faster decision-making, channel optimization, and more aggressive growth strategies across segments.

The framework also encouraged insurers to explore new distribution opportunities, expand market reach, and strengthen competitive positioning. As insurers leveraged portfolio-level flexibility to optimize expenses across product lines, commissions increasingly became an important lever for driving growth and expanding market share.

While commission growth has outpaced premium growth across several insurer cohorts, the industry's continued expansion highlights the strong potential of the market and the opportunity to further enhance underwriting quality, profitability, and capital efficiency.

However, the adverse impact of burgeoning commissions and the increasingly commission driven competition intensity in the sector, on the insurers’ Underwriting profitability is now apparent.

Exhibit 1: Commission growth in India has outpaced premium growth

Exhibit 2: Portfolio-level EOM flexibility enables cross-subsidization of expenses across products

The road ahead… transparency as a catalyst for better insurance economics

The next phase of insurance regulation is expected to bring significantly greater transparency into underwriting quality, commission structures, and capital consumption across the industry. Regulatory developments such as Ind AS 117 and the transition toward risk-based capital frameworks are likely to improve visibility into segment-level profitability, accelerate recognition of loss-making business, and align capital requirements more closely with underlying risk.

Over time, this could shift the industry from commission-led competition toward more disciplined, quality-led growth. Insurers with stronger underwriting discipline, healthier retention, and better customer economics will increasingly benefit from structurally superior profitability and more efficient capital deployment.