EoM Moves From GWP to Domestic GDPI: Why Insurers' New Expense Math Could Change Service on Large Commercial Accounts

Most of the coverage of IRDAI's late-September 2026 consultation paper on expenses and commission has focused on the commission caps, because that is the number intermediaries see on every debit note. A second change sits underneath it and will shape insurer behaviour for longer: the general insurer expenses of management (EoM) limit would be measured against domestic gross direct premium income (GDPI) instead of gross written premium (GWP), and the limit itself would step down to 25% within two years and 20% within five, as reported by Medianama on 30 September 2026.

For a large commercial buyer, the question this raises is practical. Commission is only one line inside EoM. The same envelope also pays for underwriters, risk engineers, claims teams, branch infrastructure and technology. If the envelope tightens and the base it is measured against shrinks, something has to give. Buyers are already asking whether cheaper distribution will simply mean thinner service on their accounts.

This piece works through the denominator change, why it hits some insurers harder than others, where service on large accounts competes for the same rupees, and what a buyer can write into renewal terms so the answer to that question is no.

One caveat up front: this is a consultation paper, not a notified regulation. Thresholds, timelines and definitions can change before final rules are issued. The analysis below treats the paper's proposals as the working baseline buyers should plan against.

Under the current framework, an insurer's EoM ratio is calculated on gross written premium. The paper proposes three linked changes for general insurers:

1. A new denominator. EoM would be measured against domestic gross direct premium income, not GWP.
2. A lower ceiling. The limit would move to 25% of that base within two years and 20% within five, according to the Medianama summary of the paper.
3. A yearly step-down. Coverage on bestworstinsurance.com, citing Box 2 of Part 1 of the paper, reports that the expense ceiling treats FY2027-28 as Year 1, with a reduction required each year rather than a single cliff at the end.

There is one product-specific adjustment worth noting. For the Pradhan Mantri Fasal Bima Yojana (PMFBY), only one-third of gross premium would count as GDPI for this purpose. Crop premium is large in volume but is placed through a government-run scheme, and the adjustment appears designed to stop it inflating the base against which an insurer's commercial and retail expenses are judged.

The paper also proposes mandatory cost audits covering all expenses, including payouts and non-monetary incentives to intermediaries, per a 30 September 2026 analysis by Tuli & Co published on Mondaq. That matters for buyers because it narrows the space for spend to be reclassified or routed around the ratio. Expenses will be visible, and insurers will manage them as visible costs.

GWP and domestic GDPI are not the same number. GWP includes premium an insurer accepts as a reinsurer from other insurers, and for groups with foreign branches it can include business written abroad. Domestic GDPI strips both out and keeps only direct business written in India. For an insurer whose book is almost entirely Indian direct business, the two figures are close, and the change is mostly about the lower ceiling. For an insurer with a meaningful reinsurance-accepted portfolio or an overseas book, the base shrinks while most of the expense base stays where it is.

A simple illustration shows the effect. Take a hypothetical insurer with GWP of 100 units, of which 15 units are reinsurance accepted and overseas business. Its management expenses are 26 units. Measured on GWP, the ratio is 26%. Measured on domestic GDPI of 85 units, the same 26 units of expense is about 30.6%. Nothing about the insurer's cost base has changed, but it now sits further from a 25% target and much further from 20%.

Who feels this most

• Insurers with large inward treaty or facultative portfolios, where accepted premium has been carrying part of the overhead.
• Insurers with foreign branches or significant overseas business booked in the Indian entity.
• Insurers with heavy PMFBY volumes, since two-thirds of that premium drops out of the base.

These are often the same insurers that lead large Indian property and engineering programmes, because capacity, reinsurance relationships and an underwriting bench tend to go together. That overlap is why the denominator change is a commercial-lines issue, not just an accounting footnote.

The starting point is not a cliff edge for every insurer. Industry body IBAI, citing figures from the paper itself, noted that general insurers' EoM fell from 28.2% of premium in FY23 to 26.5% in FY25, according to coverage of its submissions in Business Standard in October 2026. The trend is already downward.

The regulator's own framing is sharper. IRDAI Chairman Ajay Seth put the cost of doing business at about 32% for general insurers and about 22% for private life insurers, as reported by Asia Insurance Post on 27 September 2026. The gap between the 26.5% and 32% figures is itself informative: the two numbers are unlikely to be measured on the same basis, and the chairman's figure reads more like a total cost-of-doing-business view than the regulatory EoM ratio. Either way, the direction of travel is clear. The regulator considers general insurance too expensive to run and wants the ratio closer to 20% on a stricter base.

For a buyer, the useful reading is that the next five years are a cost-reduction programme for every general insurer, with an annual checkpoint starting in FY2027-28. Insurers will be looking for expense lines that can be cut without visibly damaging loss ratios or growth. The risk for large commercial accounts is that pre-loss service, which rarely shows up in a single year's loss ratio, looks like one of those lines.

On a large commercial account, much of what a buyer values from an insurer beyond capacity and price is paid for out of management expenses. Three lines matter most.

Risk engineering and loss prevention

Pre-inspection surveys, periodic risk-engineering visits, recommendation tracking and loss-prevention advice are cost centres. On a large manufacturing or warehousing risk, a credible survey involves travel, specialist engineers and report time. When expense budgets tighten, insurers can reduce survey frequency, shift to desk-based or self-assessed questionnaires, or concentrate engineering effort on new business rather than renewals. Our earlier piece on risk engineering survey prioritisation explains why buyers benefit from surveys even when they do not like the recommendations.

Claims staffing and handling

Claims-handling salaries and in-house claims infrastructure sit within operating expenses. Fewer in-house claims specialists on large losses can mean slower appointment of a surveyor, slower interim payments, and more reliance on generalist handlers for complex business interruption claims.

Underwriting attention at renewal is the third. Senior underwriter time is finite. A tighter envelope pushes insurers toward fewer, larger accounts per underwriter and more template-driven renewals. Bespoke wording negotiations, mid-term endorsements and site visits by underwriters all cost money.

Not automatically. Three forces pull in different directions.

First, if commission caps bring acquisition cost down, insurers gain headroom inside EoM that could fund engineering and claims capacity. Our analysis of the proposed commission caps on mega property and engineering risks covers the distribution side of that trade.

Second, the denominator change works against that headroom for insurers with large accepted or overseas books. Some of the savings from lower commission will be consumed simply by restating the ratio on a smaller base.

Third, the annual step-down from FY2027-28 means insurers cannot bank savings once and stop. Each year's budget round will look for the next cut. Service lines without a contractual anchor are the easiest to trim quietly.

The honest answer is that service quality on large accounts will diverge. Insurers that treat risk engineering as a pricing and loss-ratio tool will protect it, because good engineering lowers claims cost, which sits outside EoM. Insurers that treat it as an overhead will cut it. Buyers cannot control which kind of insurer they face, but they can control what is written into their programme, and that is where the next section focuses.

The goal is to turn service from goodwill into a documented commitment that survives budget rounds. Practical clauses and schedules to negotiate, particularly on fire and property and engineering programmes, include:

1. A risk-engineering schedule. Number of survey visits per policy year, which sites, the qualification of the surveying engineer, and the turnaround time for the written report. Tie it to the policy period rather than a verbal promise.
2. Recommendation handling. A defined process for grading recommendations, agreeing timelines, and recording completion, so that a missed survey does not later become an argument about non-compliance. The approach in our note on fire risk engineering recommendations is a good starting point.
3. Claims service standards. Named claims contact for losses above an agreed threshold, timelines for surveyor appointment and interim payment requests, and escalation routes.
4. Continuity commitments. What happens if the lead insurer reduces engineering capacity mid-term: notice, substitute arrangements, or a right to appoint an independent engineer at an agreed cost-sharing ratio.
5. Broker scope alignment. If commission falls, check what the broker's mandate still covers. Some engineering and claims-advocacy work may need to move into a fee agreement or be taken up by the insurer.

None of this guarantees service, but it changes the default. When an insurer's cost audit asks why an engineer is being sent to a site, a signed schedule is a far better answer than a relationship manager's memory.

Buyers placing large programmes across a lead and several followers can use the consultation paper to sharpen panel selection.

• Book mix. Insurers with material reinsurance-accepted, overseas or PMFBY premium face the largest restatement of their ratio. Ask brokers how each panel insurer's EoM looks on a domestic GDPI basis, not just as reported.
• Track record on glide paths. IRDAI has already acted against insurers that missed EoM targets, as our coverage of EoM glide-path enforcement and CEO pay sets out. Insurers that have struggled before are more likely to cut discretionary service now.
• Engineering capacity in practice. Count engineers and visits rather than reading brochures. An insurer that cannot tell you how many surveys it did on your sector last year is unlikely to protect that function under pressure.
• Claims bench. For accounts with complex business interruption or engineering exposure, ask who handles large losses and whether that team is in-house.

The consultation process will run its course and the final numbers may move. The direction will not. General insurers are entering a five-year expense-reduction cycle measured on a stricter base, with annual checkpoints and audited costs. Buyers who use the 2026 and 2027 renewals to write service into their programmes will be in a much stronger position when the first Year 1 budget cuts arrive in FY2027-28.