Several insurance companies exceed limit on expenses in FY22: Irdai report

In FY22, several insurance companies, both in the life and non-life segment, have exceeded the expense of management limits prescribed by the insurance regulator in its guidelines laid down in 2016, the annual report released by Irdai for 2021-22 revealed.

As far as life insurers are concerned, of the 24 companies, 16 were found to be compliant with IRDAI (Expenses of Management of Insurers transacting life insurance business) Regulations, 2016, but eight life insurers had exceeded the limits of expenses on an overall basis or segmental basis and the same are under examination and consideration for grant of forbearance.

The expense of management of regulations (2016) for life insurers prescribes the allowable limits of expenses of management taking into account the type and nature of product, premium paying term and duration of insurance business.

Overall, the life industry reported gross expenses of management of Rs 1.07 trillion in FY22, which was 15.50 per cent of the total gross premium. While the commission expenses ratio (commission expenses as a percentage of premium) decreased marginally to 5.18 per cent in FY22 , the total commission increased by 8.77 per cent during this period.

As for general and health insurers, in FY22, eight general insurers were granted forbearance in accordance with the IRDAI (Expenses of Management of Insurers transacting General or Health Insurance Business) Regulations, 2016, subject to the condition that excess of expenses of management shall be charged to shareholders’ fund.

However, eighteen insurers were found to be compliant with the regulations. And, five private insurers were under exemption period as the insurers are yet to complete the first five years of operations.

The gross commission expenses of general and health insurers was to the tune of Rs 16,931 crore for FY22, up 9.87 per cent from previous year. And, operating expenses of these insurers stood at Rs 41,455 crore in 2021-22, showing an overall increase of 8.29 per cent.

Recently, the regulator came out with draft regulations on expense of management and commission structure to bring down the cost of insurance for the consumers.

Under the proposed guidelines, which will come into effect from April 1, 2023, the regulator has proposed a limit of 30 per cent of gross written premium written in that financial years as EoM limit for general insurers and 35 per cent in case of standalone health insurers. The regulator has also said that the commission payable under general insurance products, including health insurance products offered by general insurers and health insurance products offered by standalone health insurers should not exceed the EOM limits specified by the regulator under the Irdai regulations on EoM.

As for life insurers, the regulator has said that no insurer can spend in any financial year as EoM an amount exceeding the amount of commission in the financial year; commission and expenses reimbursed on reinsurance inward; and operating expenses of life insurance business, provided that the sum of these three expenses does not exceed an amount computed on the basis of percentages in respect of various segments of business transacted during a financial year.

Analysts have said the insurance industry needs to embrace the fact that the unit cost (opex and commissions) will need to drop with the increase in industry size, in line with other financial services industries such as Mutual Funds and Banking. If the insurance industry aims to attain sustainable, long-term growth, it needs to offer products with value propositions to customers which are comparable with products from competing industries. The industry needs innovative means for controlling costs and to compete with other financial services products.



  • Of 24 insurers, 16 complied with Irdai expenses regulations

  • 8 exceeded limits on overall or segmental basis and under examination for grant of forbearance

  • Gross expenses of management of Rs 1.07 trn in FY22, up 15.5% YoY


  • Of 31 insurers, 18 complied with regulations

  • 8 granted forbearance

  • 5 under exemption period as they are yet to complete first five years of operations

  • Gross commission expenses increased 9.8% YoY to Rs 16,931 crore for FY22


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