Only 17 of 25 life insurers complied with IRDAI expense norms in FY25

Under the IRDAI (Expenses of Management, including Commission, of Insurers) Regulations, 2024, insurers are required to operate within prescribed limits on expenses of management, taking into account the type and nature of products, premium-paying terms and the duration of insurance business.

Only 17 out of the 25 life insurance companies operating in India complied with the IRDAI’s revised expense regulations in 2024–25, highlighting cost pressures in the sector even as insurers reported steady premium growth during the year, according to the annual report released Insurance Regulatory and Development Authority of India.

Under the IRDAI (Expenses of Management, including Commission, of Insurers) Regulations, 2024, insurers are required to operate within prescribed limits on expenses of management, taking into account the type and nature of products, premium-paying terms and the duration of insurance business. The norms apply across participating (Par), non-participating (Non-Par) and linked insurance products.

Data for FY25 shows that eight life insurers breached the allowable limits on an overall basis in Par and Non-Par businesses, including linked products, raising regulatory concerns around cost efficiency and sustainability of business models.

Expense ratios remain elevated

During FY25, the life insurance industry reported gross expenses of management of Rs 1.38 lakh crore, accounting for 15.60 percent of total gross premium. Expenses of management include commissions to agents and intermediaries, operating costs, employee expenses, and other administrative overheads.

While the revised IRDAI framework provides flexibility by linking expense caps to product structure and tenure, the latest figures suggest that a significant portion of the industry continues to struggle to rein in costs, particularly in businesses reliant on high commissions and front-loaded acquisition expenses.

The compliance shortfall comes at a time when insurers are aggressively expanding distribution, especially in the private sector, to drive premium growth and market share.