Board-Approved Commission Policies: How Brokers Negotiate Within Insurer Grids in 2026

Before April 2023, commission negotiation between an Indian broker and an insurer happened inside product-wise caps fixed by regulation, a schedule that left little to discuss. The IRDAI (Payment of Commission) Regulations, 2023, effective April 2023, removed those product-wise caps. Since then, every general and health insurer pays commission under a board-approved commission policy, a document its own board adopts and reviews annually, subject to a single external constraint: the insurer's overall Expenses of Management ceiling under the IRDAI (Expenses of Management, including Commission, of Insurers) Regulations, 2024.

The practical consequence for a broker is that the negotiation counterparty is no longer the regulator's schedule; it is the insurer's internal policy. What a distribution head can offer is bounded by what their board has approved, and that in turn is bounded by the EOM headroom the company has left in the financial year.

This post explains what sits inside these board-approved policies, how the grids are structured by line of business, business mix, volume, and servicing scope, where a broker has genuine room to negotiate, and what documentation the firm should retain so that every negotiated rate survives an insurer audit, an IRDAI inspection, or a client disclosure request. It is written for principal officers, placement heads, and finance controllers at Indian broking firms handling commercial books of INR 100 crore to INR 1,000 crore in placed premium.

The 2023 regulations require each insurer to have a written commission policy approved by its board, reviewed at least annually, covering the manner of commission payment across all distribution channels. The policies are internal documents and insurers do not publish them, but their operational expression, the commission grid communicated to intermediaries, follows a recognisable structure across the market.

The typical grid layers

1. Line-of-business base rates. A base commission percentage for each line: commercial fire and industrial all risks, marine cargo, engineering, liability, group health, motor, specialty. Base rates on commercial property commonly sit between 10 and 16 percent, marine cargo between 10 and 15 percent, group health between 7.5 and 15 percent depending on group size and claims experience, and motor own damage in a lower band reflecting the line's expense pressure.
2. Business mix modifiers. Insurers price the whole relationship, not the single policy. A broker bringing a balanced mix (profitable fire and engineering alongside loss-heavy group health) often accesses better rates on the loss-heavy lines than a broker placing group health alone. The mix modifier is where the board policy encodes portfolio strategy.
3. Volume tiers. Annual placed-premium thresholds with the insurer, commonly at INR 5 crore, INR 25 crore, and INR 100 crore breakpoints, each unlocking incremental basis points on the base rate or a year-end volume payment.
4. Servicing scope differentials. Higher rates where the broker demonstrably carries servicing work the insurer would otherwise fund: claims coordination, endorsement processing, wellness administration on group health, risk inspection coordination on property. This layer is expanding fastest, and it aligns with the effort-based remuneration direction IRDAI signalled publicly in July 2026.
5. Persistency and loss-ratio adjustments. Retention bonuses and loss-ratio linked components, paid or clawed back after the experience period closes.

A quoted commission rate is therefore the output of a stack, not a single number. A broker who understands which layer produced the rate knows which layer to negotiate.

The IRDAI (Expenses of Management, including Commission, of Insurers) Regulations, 2024, effective 1 April 2024, and the accompanying Master Circular cap an insurer's total expenses of management, commission included, at approximately 30 percent of gross written premium for general insurers and approximately 35 percent for standalone health insurers, with prescribed allowances and glide paths for insurers above the limit.

The ceiling is company-wide, not product-wise. That single design choice explains most of the negotiation behaviour brokers observe.

How EOM position shapes what a broker is offered

An insurer running at 27 percent EOM against a 30 percent cap has roughly three points of gross premium in headroom and can afford to buy growth with commission. An insurer at 31 percent, on a forbearance glide path with a board-committed reduction plan, will hold grids flat or cut them regardless of what the 2023 regulations would otherwise permit. Brokers see this asymmetry every renewal season: the same placement, the same servicing scope, materially different commission offers across insurers, driven by each company's EOM arithmetic rather than by the merits of the account.

Three operational habits follow for a broking firm.

1. Track each insurer's EOM position annually. The expense ratio is derivable from public disclosures. A one-page note per insurer, updated after annual results, tells placement teams where commission flexibility genuinely exists.
2. Time negotiations to the insurer's planning cycle. Grid revisions typically follow board policy review, aligned to the financial year. A negotiation opened in Q4 against a fixed grid wastes effort; the same case made in January and February, when next year's policy is being drafted, can land.
3. Never accept an off-grid rate without asking how it is funded. A rate exceeding the grid must still fit the EOM ceiling. If it is funded through a reward, an infrastructure payment, or another head, get that characterisation in writing, because it determines invoicing, GST treatment, and disclosure.

Two developments outside the 2023 and 2024 regulations now sit over every commission conversation.

First, the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025 restored the statutory power for IRDAI to cap distributor commissions. The 2023 liberalisation removed product-wise caps by regulation; the 2025 Act means the regulator can reintroduce caps, by product, channel, or otherwise, whenever it judges market conduct requires it. The same Act made intermediary licences perpetual from 5 February 2026, introduced composite licences, and permitted 100 percent FDI in intermediaries, so the distribution side of the market is consolidating and capitalising at exactly the moment the commission rulebook could tighten.

Second, in July 2026 IRDAI indicated publicly, per remarks attributed to Chairperson Ajay Seth, that it is working on an overhaul of commission rules to curb mis-selling, with a consultation paper expected around end July 2026. Items under discussion, none in force, include staggered or trail commissions over the policy life instead of upfront payment (upfront can reach roughly 40 percent on some life and health products), effort-based remuneration paying more for advisory, documentation, and claims servicing than for passive distribution, possible caps by product type, tenure, and complexity, and tighter disclosure.

Brokers routinely overestimate their ability to move the base rate and underestimate everything else. The base rate is the layer most visible to the insurer's board; it moves slowly and market-wide. The realistic negotiation surface is the modifier layers.

The five negotiable levers, in rough order of tractability

1. Servicing scope classification. If the firm handles claims coordination, endorsement drafting, and MIS for a group health account, get that scope recognised in the applicable servicing tier rather than the passive-placement tier. The difference is commonly 1 to 3 percentage points and requires evidence, not assertion: servicing logs, endorsement counts, claims touchpoints.
2. Volume tier positioning. Where the firm's annual placement with an insurer sits just below a tier breakpoint, consolidating placements from another insurer relationship can cross the threshold. Run this arithmetic every Q3, while there is still placement volume left in the year to steer.
3. Business mix credit. Ask explicitly for the mix to be priced as a portfolio. An insurer receiving INR 8 crore of profitable fire premium alongside INR 12 crore of group health should price the health commission with that context. If the relationship is priced policy by policy, the broker is leaving the mix credit on the table.
4. Payment timing and statement quality. Monthly rather than quarterly commission statements, defined credit-note timelines, and itemised endorsement-level reporting cost the insurer little and materially reduce the broker's reconciliation leakage.
5. Base rate, last and least. Reserve base-rate asks for genuine inflection points: a new line, a multi-year commitment, a tier jump.

One discipline applies across all five: never let a negotiated arrangement rest on a relationship manager's email alone. Grids change, people move, and the broker's commission booking system will be validating receipts against expectations for years. Every negotiated variation needs the paper trail described next.

The 2023 regulations put the commission policy obligation on insurers, but the documentation burden lands equally on brokers, for three reasons: the broker must disclose remuneration to clients on request, the broker's auditors must verify commission income against contractual entitlement, and the draft IRDAI (Insurance Intermediaries) (Amendment) Regulations, 2026, published for comment in June 2026, propose that intermediaries disclose intermediation revenue and other income from insurers in a separate schedule to their financial statements, file audited financials with IRDAI by 30 September each year, and publish them on their website, with stricter disclosure obligations above INR 10 crore of commission income. The draft is not in force, but a broker building its documentation practice in 2026 should build to that standard.

The minimum file per insurer relationship

1. The current grid communication, versioned and dated, with every superseded version retained. Grid version disputes are the single most common cause of commission rate mismatches at reconciliation.
2. Every negotiated variation in writing, stating the rate, the lines and clients it applies to, the effective period, the servicing scope it is conditioned on, and the funding head (commission, reward, or other remuneration). An email from an authorised insurer signatory is acceptable; a phone understanding is not.
3. The servicing evidence the variation was conditioned on: endorsement volumes handled, claims coordinated, MIS delivered. If the rate was justified by effort, the effort must be evidenced continuously, not just at negotiation.
4. Expected-versus-received reconciliation records per policy and per statement, with disputes and resolutions logged.
5. Client disclosure records showing what remuneration was disclosed, to whom, and when, for every account where disclosure was made at placement or requested afterwards.

Commission negotiation has a compliance edge, and it is the broker's problem as much as the insurer's. An offered rate can be attractive and still be one the firm should decline or restructure.

Three patterns warrant caution.

1. Rates funded outside the commission head without documentation. Where an insurer offers to top up commission through unstructured marketing support, infrastructure payments, or reimbursements with no defined deliverable, the arrangement risks being characterised as disguised commission. If IRDAI recharacterises it during an EOM inspection of the insurer, the broker's receipts become part of the finding. Accept non-commission remuneration only against a written agreement with defined services, proper invoicing, and GST charged at 18 percent on the service value.
2. Rates that imply premium relief to the client. Passing commission back to a client as an inducement remains prohibited under Section 41 of the Insurance Act, 1938 rebating provisions. A commission rate negotiated with the mutual understanding that part of it funds a client discount exposes the broker directly.
3. Rates disproportionate to servicing on tender business. On large corporate tenders where the client's broker fee or commission expectations are stated in the RFP, a commission materially above the disclosed level invites both client dispute and regulatory attention under the disclosure direction of travel.

The test the principal officer should apply is simple: could this rate, its funding head, and its servicing justification be shown to the client and to IRDAI as documented, without embarrassment? The proposed 2026 intermediary disclosure regime, if finalised, would make the broker's side of that answer a published annual document. Firms that negotiate as if their remuneration schedule will be public are negotiating for the market that is arriving.