MUMBAI: Insurance regulations to prevent mis-selling are set to tighten with the Insurance Regulatory and Development Authority of India (Irdai) set to frame stricter norms on commission disclosure and conflicts of interest, enabled by amendments cleared in the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025.The amendments give the regulator explicit powers to mandate how commissions paid to agents and intermediaries are disclosed to policyholders and to curb overlapping management between insurers and distributors, a move aimed at improving transparency and reducing mis-selling risks in insurance distribution.

According to the Bill, the authority to regulate commissions flows from Clause 36, which amends Section 40 of the Insurance Act, 1938, by inserting a new sub-section. The provision allows the regulator, in the interest of policyholders, to set limits on commissions or remuneration paid to insurance agents and intermediaries, prescribe how these payments are made, and specify the manner in which such payments must be disclosed to customers. This opens the door for rules that require insurers and distributors to tell buyers how much commission is embedded in a policy.The Bill also sharpens conflict-of-interest norms, particularly in bancassurance. Clause 25 substitutes Section 32A of the Insurance Act and explicitly bars a director or officer of an insurer from holding a similar position in a banking company or an investment company. Given banks are the largest corporate agents for insurance products, the change prevents board-level influence that could skew product distribution in favour of a linked insurer.For other intermediaries such as brokers, web aggregators and corporate agents, the restrictions will be enforced through regulations rather than a direct statutory ban. Amendments to Section 42D empower the regulator to set eligibility and fit-and-proper conditions for intermediaries and to suspend registrations for regulatory breaches. The newly inserted Section 40(2A) further gives the authority wide latitude to frame rules on matters related to agents and intermediaries, including conflicts of interest.Taken together, the changes strengthen the regulator’s hand to rein in mis-selling by making commissions more transparent and by separating ownership and management between insurers and their key distribution channels, shifting the industry towards cleaner governance and clearer disclosures for policyholders.In recent months finance minister Nirmala Sitharaman and Reserve Bank of India (RBI) governor Sanjay Malhotra have both expressed serious concerns about the widespread mis-selling of insurance products by banks in India.