Navigating the Shake-Up: What IRDAI’s Bancassurance Reforms Mean for Lenders and Insurers

7 min read |

The Insurance Regulatory and Development Authority of India (IRDAI) is preparing to rewrite the rules of bancassurance, and the financial ecosystem is paying attention.

At the heart of the change: a move from traditional commission-based models to fee-based arrangements, alongside potential caps on bank-exclusivity and revenue reliance from insurance.

If implemented, this reform could fundamentally reshape how insurance is sold, who controls the customer, and what levers drive revenue in bank–insurance partnerships.

The Proposed Shift: From Commissions to Transaction Fees

Under the current model, banks earn commissions on premiums sourced via their network. This has led to an over-concentration of insurance business flowing through a few dominant banks-creating concerns around transparency, mis-selling, and conflict of interest.

The new IRDAI proposal seeks to replace this with a fee-for-service model, where banks act more like facilitators than sales agents.

This would:

Decouple incentive from premium volume, reducing the push to sell high-ticket but potentially unsuitable products
Potentially lower margins for banks and pressure insurer unit economics

Push both parties toward customer value-driven products and improved advisory

Breaking the Tie-Up Trap: Limiting Exclusivity

IRDAI has also proposed limiting the extent to which a bank can rely on a single insurer for distribution.

Today, many large bancassurance tie-ups operate under deep exclusivity, with upwards of 90% of sourced business going to one insurer. That may soon change.

New rules may:

Cap the share of business routed to one insurer
Encourage multi-insurer marketplaces within banking apps
Force insurers to compete not with legacy contracts, but with digital UX and product-fit

This could create an opening for new-age insurers and insurtechs to plug into banking ecosystems as second or third partners-without a seat at the legacy negotiation table.

The Impact on Profit Pools

Banks, especially PSU lenders, currently rely heavily on commission income from insurance. As per reports, up to 30–50% of fee income in some cases can be traced to bancassurance.

With a shift to flat fees:

Fee income may drop in the short term.
Valuations of tied insurers-especially those reliant on one or two bank partners-may take a hit.
Large private banks may absorb the hit, but smaller players could reconsider their distribution strategies.

Meanwhile, insurers must grapple with:

Re-evaluating how they structure bancassurance partnerships.
Building digital journeys that can compete in multi-insurer, fee-based ecosystems.

Rethinking margins on complex, high-commission-led products.

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Where Insurtech Fits In

For embedded insurance players and API-first insurtechs, the reforms are less a disruption and more an opportunity.

Here’s why:

Banks moving away from commission dependence will look for plug-and-play insurance platforms with lower cost-to-serve.
A multi-insurer model opens doors for modular product placement, contextual journeys, and A/B tested offers.
Fee-based models reward efficient, tech-driven issuance, not just relationship depth.

At Symbo, we see this as a moment to enable banks and NBFCs to transition to intelligent distribution, powered by APIs, white-labeled journeys, and smart underwriting-all compliant, modular, and insurer-agnostic.

The Strategic Questions for Banks & Insurers

Stakeholder	What they should be asking now
Banks	How much of our fee income is tied to insurance commissions? What would a fee model mean for us? Are we future-ready to integrate more than one insurer seamlessly?
Insurers	What % of my business is coming from exclusive bancassurance? Do I have product and tech readiness for a more competitive, digital-first play?
NBFCs/ Fintechs	Can we embed insurance as a value-added service and revenue driver, without needing a legacy bancassurance tie-up?
Insurtechs	How do we position ourselves as enablers of modular, regulated, fee-based distribution in this new normal?

What Happens Next?

IRDAI is currently in consultation mode, but insiders suggest the shift is inevitable-and aligned with India’s broader push toward customer transparency, product suitability, and de-risked fee structures.

It’s not a matter of if. It’s a matter of how fast and how far.

Symbo’s View

This moment calls for distribution models that are not only compliant but contextual, low-friction, and scalable across partners.

We’re already working with leading banks, NBFCs, and D2C brands to design insurance journeys that prioritise trust, ease, and relevance, whether it’s embedded micro-covers, modular APIs, or digital claim triggers