The 2026 effort-based commission review and why it is different
IRDAI is reviewing how commission is paid across insurance distribution channels, with a view to differentiating high-touch agency and advisory models from lower-touch models such as web aggregators and certain bancassurance arrangements. A consultation paper setting out the proposals was expected to be published around the end of May 2026, giving insurers, intermediaries and other stakeholders the chance to respond before any rules are finalised. The core idea is straightforward but consequential: commission should reflect the actual effort, engagement and servicing a channel puts into selling and supporting a policy, rather than being set largely by channel category or product type as it is today.
This is a genuinely new development, and it is important to distinguish it from the commission and expense reforms that preceded it. The 2023 commission regulations removed product-wise commission caps and folded commission into an overall Expenses of Management ceiling, giving insurers flexibility to decide how much to pay within a total expense budget. The Expenses of Management framework, refined since then, governs the aggregate of commissions and operating expenses an insurer may incur. Those reforms were about the total envelope and the freedom to allocate within it. The 2026 effort-based review is about something different: the principle by which commission should be differentiated between channels within that envelope. It asks not how much an insurer may spend in total, but how that spend should be justified by the work each channel actually does.
Why the regulator is moving now is rooted in the numbers. Distribution costs have been growing faster than premium. In FY2024-25, non-life commission expenses rose to about INR 47,266 crore from roughly INR 39,601 crore the previous year, an increase of close to 19%, while general insurance premium grew around 8.5% over the same period. When the cost of distribution grows materially faster than the business it generates, the regulator's concern is twofold: that policyholders are ultimately bearing inefficient distribution costs, and that commission structures may be incentivising volume and channel arbitrage rather than genuine advice and servicing. The effort-based review is the regulator's attempt to re-anchor commission to value delivered, curbing both cost inflation and the mis-selling risk that flows from rewarding low-effort, high-volume distribution.
For commercial brokers, the practical question is what this means for their economics, and the answer turns on what high-touch actually involves. Commercial insurance is the archetypal high-touch distribution. Placing a corporate property, liability, engineering or marine programme involves risk analysis, wording negotiation, capacity assembly across multiple insurers and reinsurers, claims advocacy and ongoing servicing across the policy year. This is the most effort-intensive distribution in the market. If commission is to be re-anchored to effort, the channels that do the most work, of which commercial broking is the clearest example, are the ones the principle should favour. The brokers who grasp this can engage the consultation constructively and position their economics on the right side of the reform.
What effort-based remuneration actually means
The phrase effort-based remuneration is intuitive but worth defining precisely, because the consultation will turn on how effort is measured and rewarded. At its heart, the principle holds that a distribution channel's remuneration should be proportionate to the engagement, advisory input and servicing it provides per policy, rather than determined by a flat rate attached to the channel or product. A channel that prospects, analyses needs, advises on structure, negotiates terms and services the relationship across the year does more work, and bears more cost and accountability, than a channel that presents a comparison screen and processes a transaction. Effort-based remuneration says the former should be able to earn more than the latter for comparable business.
The consultation is understood to examine the contrast between high-touch and low-touch channels directly. High-touch channels, traditional agency, broking and advisory-led distribution, are characterised by per-policy involvement: prospecting and onboarding, needs analysis and advice, structuring and placement, and post-sale servicing including endorsements, renewals and claims support. Low-touch channels, web aggregators and some bancassurance models, are characterised by scale, operational efficiency and lower per-policy engagement: a digital interface or a bank counter that processes a high volume of largely standardised business with limited individualised advice. Under an effort-based principle, the high-touch channels could qualify for comparatively higher commission allowances reflecting their greater per-policy involvement, while the low-touch channels could face tighter structures reflecting their lower engagement.
This is not a judgement that low-touch distribution is bad. Digital and bancassurance channels have widened access and improved efficiency, which the regulator values. The point of the effort-based principle is alignment, not punishment: it seeks to ensure that what an insurer pays a channel reflects what that channel actually contributes, so that commission is not a source of cross-subsidy from high-effort to low-effort distribution or from policyholders to inefficient channels.
Measuring effort is the hard part, and it is where brokers should pay close attention to the consultation. Effort is not directly observable in the way premium volume is. The consultation may look to proxies: the nature of the channel and its typical engagement model, the servicing obligations a channel takes on, the complexity of the products it distributes, and the advisory and post-sale functions it performs. For commercial brokers, the substantive nature of the work, documented advice, wording negotiation, multi-insurer placement, claims advocacy, is the evidence that the broking channel is high-touch. Brokers who can demonstrate and document the depth of their engagement per account are best placed to benefit from a regime that rewards effort, because they can show the effort exists rather than merely asserting it.
The distinction also matters for the integrity of advice. A long-standing concern in Indian insurance is that commission structures can incentivise mis-selling, pushing products that pay more rather than products that fit. By re-anchoring commission to effort and genuine servicing, the effort-based principle aims to reward the advisory relationship that protects the buyer, rather than the transaction that maximises payout. For commercial brokers whose value rests on advice, this is the principle working in their favour.
How the review interacts with the Expenses of Management framework
The effort-based commission review does not operate in isolation; it sits on top of, and interacts with, the Expenses of Management framework. Understanding that interaction is essential to reading the consultation correctly, because the two address different levers and brokers need to track both.
The Expenses of Management framework sets the total envelope. It caps the aggregate of commissions and operating expenses an insurer may incur, expressed as a proportion of premium, with the intent of disciplining overall distribution and management cost. Within that envelope, since the 2023 commission reforms removed product-wise commission caps, insurers have had considerable freedom to decide how to allocate commission across channels and products. The EoM framework answers the question of how much an insurer may spend in total on distribution and management; it does not, by itself, dictate how that spend is differentiated between a high-touch broker and a low-touch aggregator.
The effort-based review addresses precisely that second question. It is concerned with the principle of differentiation within the envelope, not with the size of the envelope itself, though the regulator is reportedly also reviewing and potentially tightening the EoM caps in parallel. The interaction works in two directions. First, if the EoM caps are tightened, the total available for distribution shrinks, which sharpens the question of how the smaller pool is allocated and makes effort-based differentiation more consequential. Second, if commission is re-anchored to effort, low-touch channels that currently absorb a share of the envelope disproportionate to their engagement may see that share reduced, freeing room within the cap for high-touch channels that do more work, or simply reducing total distribution cost in line with the regulator's efficiency objective.
To support this work the regulator has been gathering granular data, including seeking detailed distributor-level commission information from life insurers, which signals an intent to base the reform on evidence of what each channel actually costs and contributes rather than on broad assumptions. For brokers, the lesson is that the reform will be data-driven, and that the firms able to evidence their effort and servicing will fare better than those who cannot.
For commercial brokers, the combined effect of a tightening EoM cap and an effort-based commission principle is, on balance, favourable, provided the broker is genuinely high-touch. A tighter envelope intensifies scrutiny of low-value distribution cost, and an effort-based principle directs the remaining spend toward channels that deliver advice and servicing. The risk for brokers lies not in the principle but in execution: if effort is measured crudely, by channel label rather than by demonstrated engagement, some genuinely high-touch broking could be miscategorised. This is exactly why brokers should engage the consultation, both to support the principle and to argue for effort measures that recognise the substantive work commercial broking involves. Brokers who treat the consultation as background noise risk a framework calibrated without their input; brokers who respond can help shape measures that reflect their reality.
Implications for commercial broker remuneration and advisory economics
The practical question for any broking firm is what an effort-based regime does to remuneration and to the economics of running an advisory business. The honest answer is that it depends on execution, but the direction of travel is favourable for genuinely advisory commercial brokers and challenging for any broker whose model has drifted toward low-touch, high-volume distribution.
On remuneration, the central implication is that commission should become more defensible and, for high-touch commercial broking, potentially more sustainable. If the principle is that effort earns commission, then the substantial effort in commercial placement, risk analysis, wording work, multi-insurer and reinsurance placement, claims advocacy, becomes the justification for the broker's remuneration rather than something the broker must defend against pressure to discount. In a market where distribution cost is under scrutiny, being able to demonstrate that your remuneration corresponds to genuine, documented work is a structural advantage. Brokers whose economics rest on advice rather than on volume should find the effort-based principle aligns remuneration with the value they actually deliver.
On advisory economics, the reform reinforces a model that good commercial brokers already run. The economics of advisory broking depend on being paid enough per account to fund the analysts, the placement effort, the claims support and the technical infrastructure that quality advice requires. A regime that rewards effort supports those economics; a regime that rewards volume erodes them by encouraging a race to the bottom on price and service. The effort-based principle, by re-anchoring commission to engagement, helps protect the investment a serious broking firm makes in capability. The corollary is that brokers will increasingly need to evidence that investment: documented advice, structured placement records, demonstrable servicing and claims support become not just good practice but the basis on which remuneration is justified.
There is also a competitive dimension. If low-touch channels face tighter commission structures, the relative economics of high-touch broking improve, which can shift business and talent toward advisory models. For commercial broking, where low-touch substitutes barely exist for complex risk anyway, the more important effect is internal: within the broking community, the firms that genuinely add value should be advantaged relative to those competing largely on price for commoditised business. The reform rewards depth over breadth.
The transition is not without risk. Brokers who have under-invested in advisory capability, or whose books skew toward simple, low-engagement business, may find the effort-based lens unflattering. And there is execution risk in how the regulator measures effort: a crude proxy could disadvantage some genuinely high-touch brokers. The prudent response is twofold. First, invest now in the capability and documentation that evidence high-touch engagement, so that whatever measures emerge, the broker can demonstrate effort. Second, engage the consultation to argue for effort measures that recognise the substance of commercial broking. The firms that do both will enter the new regime with their economics aligned to the principle and their case made to the regulator.
Disclosure, transparency and the broker-buyer relationship
Effort-based commission reform connects directly to the disclosure agenda, because a principle that ties remuneration to effort only works if the effort and the remuneration are transparent to the people who ultimately bear the cost: corporate buyers. For commercial brokers, this is where the reform meets the relationship with the client, and it is an opportunity as much as an obligation.
Commission disclosure for commercial lines has been moving toward greater transparency, and an effort-based regime accelerates that direction. If commission is justified by effort, then the natural complement is that buyers can see both the remuneration and the work it pays for. For a commercial broker, this is not a threat but a chance to make the value proposition explicit. A corporate risk manager who understands that their broker's remuneration corresponds to risk analysis, wording negotiation, multi-insurer placement and claims advocacy is far more likely to value the relationship than one who sees only an opaque commission line. The effort-based principle gives brokers a framework for that conversation: remuneration reflects effort, and here is the effort.
For corporate buyers, the reform should improve the alignment between what they pay for distribution and what they receive. A regime that rewards effort and curbs low-value distribution cost is, in principle, in the buyer's interest, because it reduces the cross-subsidy of inefficient distribution and ties the broker's incentive to genuine advice and servicing rather than to product push. Risk managers should welcome the transparency this brings and should use it to assess their broker relationships: a broker whose remuneration is justified by demonstrable effort and whose advice protects the buyer's interest is delivering value; a broker who cannot show the work behind the commission is a relationship worth reviewing.
The broker-buyer relationship is, ultimately, what the effort-based principle is trying to protect. The mis-selling concern that motivates the reform is fundamentally a concern that commission can corrupt advice. By re-anchoring commission to effort and servicing rather than to product payout, the reform aims to keep the broker's incentive aligned with the buyer's interest. For commercial brokers, whose entire value rests on trusted advice, this alignment is the foundation of the relationship. The reform, properly executed, strengthens it.
Brokers should also note the disclosure-reconciliation dimension. As remuneration becomes more closely tied to effort and more transparent, the systems that record what was placed, what was earned and what work was done become more important. Clean, reconcilable records of placement, servicing and remuneration are the practical infrastructure of an effort-based, disclosed regime. Brokers running on fragmented records will struggle to evidence effort or to disclose remuneration cleanly; brokers with structured, reconcilable systems will navigate the new regime smoothly.
A preparation agenda for commercial brokers
Because the consultation paper was expected around end-May 2026 and the rules will follow after a response period, brokers have a window to prepare and to influence. The agenda divides between engaging the consultation and positioning the firm.
On engagement, brokers should treat the consultation as a chance to shape the framework rather than a fait accompli to react to. The substantive points worth making are, first, that commercial broking is the archetypal high-touch distribution and that effort measures should recognise the substantive work, analysis, wording, placement, claims advocacy, rather than relying on crude channel labels; second, that effort is demonstrable and brokers can evidence it, so the regime should reward documented engagement; and third, that a well-calibrated effort-based principle serves the regulator's own objectives of cost efficiency and reduced mis-selling. Brokers and their industry bodies who respond constructively help produce a framework that reflects the reality of advisory distribution.
On positioning, the agenda has four strands. First, invest in and document advisory capability: the analysis, placement records, servicing logs and claims support that evidence high-touch engagement, because under an effort-based regime the ability to show effort is the basis of remuneration. Second, review your book for low-touch drift: identify business that has become commoditised or low-engagement, and decide whether to deepen the service or to recognise that its economics will tighten. Third, strengthen records and reconciliation, because an effort-based, disclosed regime depends on clean systems that record what was placed, earned and serviced. Fourth, prepare the client conversation: build the narrative and, where appropriate, the documentation that lets you explain to corporate buyers how your remuneration corresponds to the work you do, turning the transparency the reform brings into a demonstration of value.
The underlying strategic point is that the effort-based principle rewards exactly the kind of broking the market should want more of: advisory, engaged, transparent and aligned with the buyer's interest. For brokers who already operate this way, the reform validates and protects their model. For brokers who have drifted toward volume and low engagement, it is a prompt to either deepen their service or accept tighter economics.
Sarvada strengthens exactly the high-touch capability the effort-based regime rewards, giving commercial brokers structured access to insurer policy wordings and the coverage detail that underpins genuine risk analysis, precise placement and demonstrable advisory effort across the account. As commission is re-anchored to engagement and as disclosure tightens, brokers who can evidence wording-grounded, substantive work will be best placed to justify and sustain their economics. Request Access to evaluate how Sarvada can deepen and document the advisory effort that defines a high-touch commercial broking practice.