Life Insurance Commissions Rise Faster Than Premium Growth in FY25

Life insurance companies in India paid ₹60,800 crore as commission in 2024–25, marking an 18% year-on-year increase. This sharp rise came even as premium collections grew at a much slower pace of 6.73%, reaching ₹8.86 lakh crore during the year. The data highlights the rising cost of acquiring and retaining customers in a highly competitive insurance market.

Commission Costs Move Higher

The commission expenses ratio, which measures commission as a share of premium income, increased to 6.86% in FY25 from 6.21% in FY24. A large portion of the payout was linked to new business. Around ₹40,824.94 crore was paid as commission for acquiring new policies, while ₹19,974.97 crore was paid on renewal premiums. This trend shows insurers’ continued dependence on commission-led distribution channels to drive growth.

Operating Costs Show Improvement

While commission expenses rose, overall operating costs for life insurers moved in the opposite direction. Operating expenses declined by 13.14% to ₹77,342 crore in FY25. The operating expenses ratio improved to 8.73%, down from 10.73% in the previous year. This suggests that insurers achieved better cost control in areas such as administration, technology, and internal processes.

Growing Gap in Expense Structure

The diverging trend between commission payouts and operating expenses points to a key challenge for the insurance industry. Even as insurers streamline internal costs, the expense of distribution continues to rise. Insurers are also adjusting commission structures following changes in GST treatment, as they attempt to manage the impact of lower input tax credits.

Pressure Extends to General Insurance

High commission costs are not limited to life insurance. In the non-life insurance segment, combined gross commission expenses stood at ₹47,266 crore in FY25, exceeding the ₹37,811 crore operating expenses of the entire industry. As a result, 15 out of 35 non-life insurers and eight out of 25 life insurers breached regulatory expense limits during the year.

Regulatory Attention Increases

The rising cost of distribution has drawn closer scrutiny from regulators. Elevated expenses are seen as a barrier to wider insurance adoption, as higher costs are passed on to customers through pricing. Reports suggest that new draft regulations are being prepared to rein in commission payouts and improve affordability.

Read more: Adani Power Share Price Performance Defies Rivals in 2025 As BSE Power Index Falls Nearly 14%.

Conclusion

The FY25 data highlights a clear imbalance in the insurance sector, where commission costs are rising much faster than premium income. While insurers have improved internal efficiency, high distribution expenses remain a concern. Stronger regulation and alternative distribution models may be needed to support sustainable growth and improve insurance coverage in the years ahead.

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