To understand the shock over IRDAI's consultation paper on reforming various aspects of the insurance sector, including commissions, go back a decade, to when caps were first set product by product. Insurers paid brokers, agents and corporate agents more than the caps allowed. The industry had a name for it: overriding commission (ORC). Everyone knew, including the regulator.
The reason, or so the industry believed, was too few distributors. Licensing was strict and onboarding slow, so everyone competed for the same limited pool by paying more. IRDAI's fix: make onboarding easier. Point-of-sale person (PoSP) allowed insurers and brokers to certify sellers directly, without a full licence. Car dealers got Motor Insurance Service Provider (MISP) status for a different reason - they sold high-cost car insurance to a captive audience with little regulatory oversight, so costs and commissions ran wild. MISP brought them under some governance.
