IRDAI Rules for Insurance Agents in India: Proposed Reforms, Code of Conduct, Commission & Licensing Rules

Key Highlights:

• Proposed IRDAI 2026 reforms and new insurance distribution categories
• Commission rules, proposed caps and EOM limits for insurers
• Mis-selling safeguards, customer transparency and digital infrastructure
• Insurance agent eligibility, training and IC-38 exam requirements
• IRDAI code of conduct, including key dos and don’ts
• Commission, licence renewal, suspension, cancellation and penalty rules

If you are an insurance agent working in India, or are planning to become one, understanding the IRDAI rules and latest reforms for insurance agents is essential before you begin. 

A major move by IRDAI needs the attention of everyone associated with insurance as a service or as a career. The release of an IRDAI consultation paper titled Recalibrating Economics of Insurance Distribution on 23 September 2026 proposes significant changes to insurance distribution, commission structures, transparency requirements, and safeguards against mis-selling. 

This guide explains IRDAI’s latest proposed insurance distribution reforms, code of conduct for insurance agents, the commission framework, license renewal guidelines affecting intermediaries, and other key details that could reshape insurance distribution in the coming months.
 

Proposed IRDAI Insurance Distribution Reforms 2026: What’s Changing? 

IRDAI has recently issued a detailed consultation paper titled Recalibrating Economics of Insurance Distribution. As of now, these reforms are proposals only, and public comments are open until 25 October 2026. If approved, the proposed IRDAI regulations 2026 are expected to be applicable from 1 January 2027 or 1 April 2027.

Major proposals in the consultation paper are as follows:

1. Simplified Distribution Categories: IDEs, IDPs and MIIs

The existing multi-category system of insurance distribution is now proposed to be replaced by three broad categories:

• Insurance Distribution Entities (IDEs): Companies and firms that sell insurance 
• Insurance Distribution Persons (IDPs): Individuals who sell or advise on insurance 
• Market Infrastructure Institutions (MIIs): Digital platforms that support insurance distribution 

2. Proposed Commission Caps for Agents and Distributors

IRDAI now proposes that commission cap limits will vary according to the line of business, distribution channel, product complexity, and effort involved in selling, and whether the policy is new or a renewal. The proposed reforms suggest the IRDAI's new rules for agent commission as follows: 

Health Insurance (Individual)

• First-year: Up to 15% for distribution entities and 20% for agents/associates
• Renewals and portability: Up to 5% for distribution entities and 10% for agents/associates

Life Insurance (Individual non-linked and linked products)

• Premium-payment term of 10 years or more: First-year up to 20% for distribution entities and 25% for agents/associates (with lower rates on renewals)
• Shorter premium-payment terms attract lower first-year caps (ranging from 5–18% for entities and 6.25–22.5% for agents, depending on the term)

3. Proposed Expenses of Management (EOM) Limits

IRDAI has also proposed to revise the overall expense of management limits for insurers. The proposed changes as per IRDAI new guidelines for insurance companies are as follows: 

• Life insurers: Move to a company-level limit linked to Gross Direct Premium Income (GDPI), proposed at 15% within two years and 12.5% within five years.  
• General insurers: Shift from Gross Written Premium (GWP) to domestic Gross Direct Premium Income (GDPI), with the limit reducing from 30% to 20% of domestic GDPI within five years (through progressive annual reductions).

4. Stronger safeguards against Mis-selling

IRDAI proposes stricter rules for mis-selling in insurance. The recent changes in IRDA guidelines regarding mis-selling are proposed as follows: 

• Any mis-selling activity, if proven, will result in Claw-back Commissions (Withdrawal of commissions from agents)   
• Restrictions on compulsory bundling of insurance with loans  
• Prohibition of volume-linked or reward-linked incentives for bank/NBFC staff  
• Bringing all forms of remuneration (direct, indirect, monetary, non-monetary) within the regulatory definition of commission  
• Mandatory tagging of the authorised salesperson with every policy

5. Proposed Motor Insurance Commission Rules

IRDAI says motor insurance pays some of the highest commissions in the industry. For new vehicles, it proposes:

• Third-party cover: No commission for distribution entities and 2.5% for agents.
• Own-damage and related covers: 5% for entities and 10% for agents.
• Cashless repairs: Dealers can't deny them just because the policy was bought elsewhere.
• Older vehicles: Caps are higher. Third-party cover gets 2.5% for entities and 5% for agents, and own-damage and related covers get 10% for entities and 15% for agents. 

6. Customer Disclosure and Transparency

The proposal also tries to make distribution costs visible to the people paying for them through the following measures:

• Commission disclosure: Insurers and large distributors would publish their commission policies in simple language.
• Seller identity: Each policy would be linked to the person who sold it.
• Suitability checks: Distributors would need to document why a product fits the customer.

IRDAI has proposed rules requiring certain insurance intermediaries earning more than ₹10 crore in annual commission to disclose their earnings and financial details. These disclosures may include commission income, related-party transactions, profits and dividends. The aim is to improve transparency and accountability in the insurance sector.

Note: The ₹10 crore commission disclosure limit is a proposal and has not yet been confirmed as final.

7. Digital Infrastructure: PIR and Bima Sugam

• The plan also proposed two aspects of digital infrastructure: the Public Insurance Registry (PIR) and Bima Sugam.
• Public Insurance Registry (PIR): It was proposed by IRDAI on 1st September, 2026 as a shared database behind the system that will let insurers, intermediaries, regulators, and other institutions exchange information using common standards. The 23 September paper also includes it as the system that would show each seller's identity, keep public records of mis-selling, and provide verified information on products and intermediaries. 
• Bima Sugam: Bima Sugam is proposed as a digital insurance marketplace where people can compare and buy policies from different insurers in one place. IRDAI's consultation paper names it as a Market Infrastructure Institution (MII), a neutral, digital alternative to the intermediary-led model.

How the Proposed Reforms Could Affect Insurance Agents and Intermediaries? 

The IRDAI consultation paper released on 23 September 2026 is still only a proposal. Final rules may change after feedback closes on 25 October 2026. However, if the suggestions are accepted largely as they are, here is how they could affect the individual insurance agents and intermediaries. 

Individual Insurance Agents 

• Individual Insurance agents may get slightly higher commission rates than brokers or corporate agents on the same products. 
• The overall commission percentage could be lower than what many agents earn today under the flexible 2024 system.  
• There will be more focus on keeping policies active (persistency) and less on just selling new policies.  
• Accountability will be stricter, and any incomplete disclosure or pressure tactics by the agent could lead to faster action against the agent.

Other Intermediaries (Brokers, Corporate Agents, Banks, Web Aggregators) 

• Proposed commission rates are generally lower than those suggested for individual agents.  
• Products sold with loans or new vehicles (especially motor third-party) may see a big drop in commission, or even zero commission in some cases.  
• Extra rewards or volume-based incentives that many institutional channels currently receive may face tighter restrictions.
   

Who Can Become an Insurance Agent? - A Quick Overview 

For someone who wants to know how to become an insurance agent in India, it is important to understand that you must comply with some basic eligibility guidelines for appointment of insurance agents as specified by IRDAI.

Here are the key eligibility requirements:

• Age: At least 18 years
• Education: Class 10 or as the insurer specifies
• Clean Record: No fraud, cheating, forgery, or criminal record
• Qualified Exam: Passed the IC-38 exam 
• Mandatory Training: Must complete the training before the IC-38 exam. 
• Documents: Aadhaar Card or PAN Card and an Address proof, Passport-size photo, IRDAI Certificate.

IRDAI Code of Conduct for Insurance Agents 

As per IRDAI rules and regulations, every insurance agent in India is required to follow a prescribed code of conduct. This code of conduct covers two things: what an agent is expected to do while selling and servicing insurance, and what an agent is strictly prohibited from doing. Both are equally important for an agent. 
 

Code of Conduct you have to follow as an Insurance Agent

• Introduce yourself clearly: Every agent must introduce themselves and state which insurer they represent. The customer has the right to know who they are dealing with.
• Show your identity card and appointment letter: As an insurance agent, you must carry your agency identity card at all times and show it to the prospect or customer. If the customer asks to see your appointment letter, you are required to present it to them.
• Explain the product based on customer needs: Pitching a product is not enough. You must share all relevant information about the insurance products your insurer offers and recommend a plan that genuinely fits the customer's needs. The IC-38 Exam syllabus is designed to give you this product knowledge across life, health and general insurance. 
• Give impartial advice if you represent multiple insurers: As a composite agent (who works for multiple insurers), you must give unbiased advice on all the products available across those insurers and shall not just push the one that pays you more.
• Disclose your commission if asked: Your customer may ask about your commission payout for the product you are selling; in such cases, you are required to tell them about your commission. Refusing or avoiding the question is not permissible as per IRDAI. 
• Inform the customer about the premium: You must clearly tell the customer what premium the insurer will charge for the product being recommended. 
• Explain the proposal form and importance of disclosure: Explain to the customer in simpler and clearer terms as to what information is needed in the proposal form and why honest and complete disclosure matters on their part. 
• Submit a confidential report on the customer: In case you find any fact about the customer that has a potential effect on the insurer's underwriting decision, such as a health condition, adverse habit, or income inconsistency, you must report it to the insurer through an Insurance Agent's Confidential Report along with the proposal.
• Collect all required documents: You need to collect and maintain a proper record of all necessary documents from the customer at the time of submitting the proposal form, and also in case of any additional documents required later.
• Advise customers to make a nomination: This is a basic code of conduct for insurance agents but an important one that is often overlooked by customers. An agent needs to encourage every customer to nominate a beneficiary under their policy. 
• Keep the customer informed about their proposal: Once a proposal is submitted, keep the customer informed whether it has been accepted or rejected by the insurer.
• Help with policy servicing: An agent’s job does not end at the sale. You must assist the customer with all policy-related matters like address changes, assignments, exercising policy options, and any other needs that come up during the policy term.
• Assist in claim settlement: When a policyholder or nominee needs to file a claim, you must help them understand the process and complete the required documentation to ensure a smooth settlement.
   

What an Insurance Agent Shall Not Do 

• Selling without a valid appointment: You cannot sell an insurance policy without being formally appointed by a licensed insurer. Doing so is illegal and can result in immediate cancellation of your agency and impose financial penalties.
• Encouraging the customer to misrepresent or hide any information. Never encourage or pressure a customer to hide any important information in the proposal form. Any such conduct affects the insurer's underwriting decision and is a serious violation of IRDAI’s code of conduct.
• Submitting wrong information on behalf of the customer: An agent should not submit any incorrect information or false documents to the insurer for acceptance of the proposal. This is considered fraud and can lead to cancellation of both the policy and the agent’s licence.
• Using multilevel marketing to sell insurance.  Insurance cannot be sold through multilevel marketing networks. This is a business model where a person earns not just from their own sales but also by recruiting others into the network and earning a margin from their sales as well. Entering into such practices is a serious offence in the insurance industry and can result in the disqualification of insurance agent or cancellation of the licence. 
• Misbehaving with the customer: Every customer deserves to be treated with respect. Any rude behaviour, disrespect or any other kind of misconduct with a customer is a violation of the IRDAI code of conduct, regardless of whether a sale is made or not.
• Interfering with another agent's client or proposal: An agent should not interfere in any other agent’s proposal or client that has been introduced by another insurance agent. Winning over some other agent’s clients or disrupting another agent's business is not permitted.
• Offering unofficial rates or terms: An agent cannot offer the customer any rates, benefits, terms, or conditions that are different from what your insurer officially offers. Every offer made to a customer must be strictly as per the insurer's approved product terms.
• Demanding a share of the policy payout: Insurance agents are not allowed to demand or accept any portion of the claim payout or policy proceeds from a beneficiary under any circumstances. Your earnings are limited to the commission paid by the insurer.
• Forcing a customer to cancel and rebuy a policy. Do not pressure a policyholder to cancel their existing policy and buy a new one from you within three years of that cancellation. This practice is a direct violation of IRDAI rules and one of the most common forms of mis-selling.
• Reapplying too soon after a cancellation: If your agency appointment was previously cancelled by IRDAI or the designated official, you cannot apply for a fresh appointment till 5 years from the date of IRDA code cancellation.
• Becoming a director of an insurance company: As an insurance agent, you cannot become or continue to remain a director of any insurance company. This is a strict conflict of interest restriction under insurance agent regulations.

Insurance Agent Commission Rules Under IRDAI

The old system of fixed, product-wise commission caps is no longer in place. Before April 2023, IRDAI used to directly regulate how much commission an insurance agent could earn on each product. There were fixed commission slabs published by IRDAI specifying the exact percentage an agent could earn as first-year commission, renewal commission, and single premium commission separately for life, health, and general insurance products.  

This changed in April 2023, when IRDAI removed the product-wise caps and replaced them with an overall Expenses of Management (EoM) limit. The IRDAI (Expenses of Management, including Commission, of Insurers) Regulations, 2024 later consolidated this framework. Under it, IRDAI no longer publishes fixed first-year or renewal commission slabs by product. Instead, each insurer determines IRDAI agent commission structure in its own while complying with the following conditions:

• Staying within the overall Expenses of Management (EOM) limits set by IRDAI 
• Having a Board-approved commission policy that is in the policyholders' interest
• Linking payouts to quality measures like persistency and mis-selling controls

Note: As per the proposed reforms on 23 September, IRDA new rules for agent commission suggest product-wise commission caps. However, the proposals are still not finalized, and the rules above apply until IRDAI notifies new regulations. 

IRDAI Insurance Agent Licence and Renewal Rules 

As per the earlier system, every insurance intermediary (such as brokers, corporate agents, and web aggregators) was required to renew the licence every three years from the date of the new licence issued or renewed. In simple words, the IRDA licence had a validity of 3 years, before which the agent had to:

• apply for renewal
• pay the prescribed renewal fee
• fulfil all compliance requirements to continue operating legally. 

But the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025 introduced perpetual registration (valid indefinitely) with effect from 5 February 2026. With the new update in place, insurance intermediaries such as brokers, corporate agents, insurance marketing firms, and web aggregators: 

• No longer need to apply for renewal every three years.
• Must pay an annual fee to keep the licence active.

Note: However, if you're an individual insurance agent, the annual fee doesn't apply to you, but you must pay the IC-38 exam fee, along with registration and training charges at the time of starting your journey to become an insurance agent. 

But here is something important to note: this perpetual registration change applies to insurance intermediaries, including brokers, corporate agents, insurance marketing firms, and web aggregators. No specific guideline is stated for any change in  individual insurance agents’ licence renewal.  Source: Transitional arrangements for payment of Annual Fee and issuance of Certificate of Registration 
 

When Can IRDAI Suspend or Cancel an Agent's Licence?

IRDAI may choose disqualification of insurance agent or cancel an agent's licence after giving a formal notice and a reasonable opportunity to present their side. An agent’s licence is cancelled or suspended if he or she:

• Violates any insurance regulation: If any agent violates the provisions of the Insurance Act, 1938 or any other regulations for insurance agents laid down by the IRDAI, action can be initiated against them.
• Fails to follow the code of conduct. Any breach of the code of conduct prescribed by IRDAI. This included mis-selling any insurance policy, non-disclosure of any crucial facts, or any other prohibited practice will lead to suspension or cancellation of the agent’s license. 
• Provides false information in the agency application: Any incorrect details or hiding any important facts by the agent at the time of applying for an agency appointment will lead to cancellation of the agent’s license. 
• Does not submit required information or returns: Failing to submit information, documents, or returns that the insurer or IRDAI has asked for is treated as non-compliance and can lead to action against the agent.
• Does not cooperate with an IRDAI inspection or enquiry: If the agent fails to cooperate or respond in case of any inspection or enquiry by the insurer, it can result in suspension or cancellation of the licence.
• Fails to resolve policyholder complaints: If an agent repeatedly fails to address policyholder grievances or does not respond satisfactorily when IRDAI takes up a complaint, it can be treated as a conduct violation.
• Misuses money collected from policyholders: Any direct or indirect misuse, theft of any premium or cash collected from policyholders on behalf of the insurer, the licence can be suspended or cancelled. However, an agent is not legally authorised to collect cash or premiums from customers unless specified by the insurer. 

For any misconduct or violation of any regulations by an agent, IRDAI has secured some strict penalties for the insurance agent. 
 

IRDAI Penalties for Insurance Agents and the Insurer

If any insurance agent or the insurer violates the regulations, he/she or the entity is subject to the following penalties as per IRDAI rules and regulations. 

• Penalty on the agent: If an insurance agent acts in violation of the Insurance Act, 1938 or any IRDAI regulations made under it, they can be penalised up to ₹10,000.
• Penalty on the insurer for appointing an ineligible agent: In case any insurer appoints an ineligible agent and conducts insurance business through such a person, the insurer can be penalised up to ₹1 crore.
• Penalty on the insurer for agent misconduct: If an agent commits misconduct, including any violation of the code of conduct or participates in misselling, or violates IRDAI rules, the insurer can be held liable for such actions by the agent and can be penalised up to ₹1 crore for such violations.

Conclusion 

The insurance industry in India is a dynamic space that keeps evolving with new regulations and updates. IRDAI has put a clear set of rules that govern every aspect of an agent's work, from eligibility and appointment to conduct, commission, compliance, and license renewal.

IRDAI has recently released a consultation paper named Recalibrating Economics of Insurance Distribution, which proposes product-wise commission caps, lower expense limits for insurers, and simpler distributor categories (IDEs, IDPs and MIIs). However, the proposed insurance distribution reforms are not final rules. The changes, if they get finalized, could apply from 1 January 2027 or 1 April 2027. 
 

Disclaimer: The information provided in the blog is for informational and educational purposes only. While every effort has been made to provide accurate and updated information, the details may vary as per different sources. You are advised to consult qualified professionals before making any decision.

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