The Economic Survey 2025-2026 in its coverage of the insurance sector, appears to highlight the fundamental idea that the high dependence on intermediaries – read ‘high’ distribution overheads – acts as a barrier to increasing insurance penetration. The Survey notes that rising customer acquisition cost through the intermediary channel causes not only an operational friction, but is also a structural constraint for the growth and evolution of the insurance industry.
It could be argued though, that the vision of “Insurance for All by 2047” articulated by the government and the Insurance Regulatory and Developmental Authority (IRDAI) would be realised only when the road to achieve this vision is made inclusive, and viewed from a holistic perspective of strategic development and execution.
With over 63% of India’s population living in rural areas, translating into over 900 million people, an inclusive approach for covering Bharat is critical for success. If insurance penetration has to grow significantly from the current 3.7%, intermediaries will continue to play a pivotal role and be a cost-effective channel to reach Bharat. In addition to life and health insurance, adequate coverage for assets and protection for Small and Medium Enterprises (SMEs) are essential to ensure that the momentum required from the insurance sector to support Bharat’s growth story is effectively maintained.
In order to protect lives and livelihoods through insurance, both under life and general insurance, a comprehensive perspective that intrinsically highlights the critical value contributed by the intermediaries would hence need to be adopted. I have encapsulated this into a 5-A framework.
Awareness
As per a survey conducted by Insurance Regulatory and Development Authority of India (IRDAI) through National Council of Applied Economic Research (NCAER) in 2021, television serves as the major source of any information for both the insured and uninsured. However, when it comes specifically to insurance, the major source of information is insurance agents.
Accessibility
Fewer than 2% of the Indian population are equipped to directly access and purchase financial products including insurance using technology. Intermediaries are the critical last-mile interface, enabling access to the rest of Bharat. Intermediaries must be adequately incentivised to remain economically viable as they bear significant costs in soliciting and marketing insurance products tailored to customer needs, and due to the low lead-to-customer conversion as a result of low perceived value of insurance in India.
Advice
Personalised advice for products like insurance is essential to make informed decisions by the customer, given the complexity of terms and conditions associated with such products. Products also need to be customised to suit the requirements of every individual. Intermediaries play a pivotal role in this process, guiding customers through their purchase of insurance policies. The Point of Sales Person (PoSP) model introduced by the IRDAI about a decade ago to go deeper and wider across India, has gained significant traction, with an estimated 2 million PoSPs offering personalised advice and facilitating insurance sales.
Alignment
Intermediaries serve as a crucial link between the customer and the insurer and facilitate a seamless customer experience by aligning product innovation, quality servicing, and claims management with the effective use of technology.
Affordability
Insurance affordability represents a balance between the price paid in the form of premium and the protection it provides. Intermediaries play a crucial rule by guiding customers through complex policy terms, helping them assess affordability to risk protection and facilitating informed purchase decisions.
If India is to move swiftly toward “Insurance for All by 2047”, commissions to intermediaries should remain flexible rather than restricted. Furthermore, in a large country like India, it would be prudent to incentivise innovative distribution models which can improve overall affordability by leveraging economies of scale.
Under the existing regulation on Expenses of Management (EoM), insurers are subject to a cap on total expenses including intermediary commissions. This framework allows insurers sufficient discretion and provides equal safeguards to effectively manage underwriting profitability, incorporate checks and balances which can be reviewed periodically to address any challenges.
The policy-making direction with its sharp focus on improving insurance penetration and sustainability would definitely be benefited if it continues to encourage, the elemental and productive role that intermediaries play in the progression of the insurance industry.
Disclaimer
Views expressed above are the author’s own.
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