# Indian Insurers Seek Phased Transition for New Expense Caps Regulators propose strict expense management limits, prompting industry calls for a gradual implementation timeline. - **Source:** [mint - industry](https://www.livemint.com/rss/industry) - **Published:** 2026-10-15 - **Topic:** [Business](https://brifing.si/c/business) - **Original article:** - **On Brifing:** https://brifing.si/s/a70e10b5-8c13-40b8-956e-e22f6474a6e5 ## Regulatory Shift in Expense Management The Insurance Regulatory and Development Authority of India (Irdai) has proposed significant reductions in Expense of Management (EoM) ratios. General insurers face targets of 25% by FY28 and 20% by FY32, while life insurers must reach 15% and 12.5% respectively. These rules aim to standardize cost structures across the entire insurance industry. ## Impact of Revised Calculation Methods Irdai is changing how EoM is calculated by narrowing the base to premiums sold directly in India. Reinsurance commissions can no longer offset costs, and specific allowances for technology or rural business are now included under the cap. Crop insurance premiums will only count at one-third of their total value for these calculations. ## Current Market Performance Analysis Calculations based on FY26 disclosures show that major players like ICICI Lombard and Bajaj General currently exceed the proposed limits. Among the top five general insurers, only New India Assurance meets the two-year target. Life insurers like HDFC Life and ICICI Prudential Life also require significant cuts to reach the 15% threshold. ## Industry Push for Glide Path Insurers are actively lobbying for a phased transition to meet these tighter caps. Industry experts argue that an overnight implementation is unfeasible given the current operational structures. Executives are engaging with the regulator to negotiate a more workable timeline that prevents sudden disruptions to business growth and distribution channel stability. ## Consequences of Regulatory Non-Compliance Breaching the new ceilings carries severe penalties, including restrictions on launching new products or distributing dividends. In extreme cases, Irdai may curb new business through specific channels. Four insurers, including Acko and Niva Bupa, were already barred from opening new branches in August due to lapses in following existing EoM limits. ## Operational and Strategic Challenges Saurabh Bhalerao of CareEdge Group notes that single company-wide ratios may mask variations across different business lines like fire or health insurance. Strict enforcement could force insurers to slow growth to fix cost structures. Smaller firms lacking proprietary distribution channels face particular difficulty in balancing high expenses with necessary premium growth. ## Investor Sentiment and Market Outlook Despite the regulatory pressure, investors remain committed to the Indian market. Some firms are evaluating whether parent companies must inject additional capital to support operations during this transition. However, the cumulative burden of these shifts may consume significant management bandwidth, potentially slowing down overall sector growth in the near term. ## Long-term Industry Transformation The proposed reforms represent a fundamental shift in how Indian insurers manage distribution and operational costs. While the industry acknowledges the need for reform, the transition requires a delicate balance between regulatory compliance and maintaining market momentum. Success will depend on the regulator's willingness to adopt a phased, realistic glide path. ## Sources covering this story - https://www.livemint.com/industry/facing-steep-expense-cuts-under-proposed-irdai-caps-insurers-seek-gentler-glide-path-11791956066642.html — --- _Summary written by Brifing from the original reporting. Copyright in the original article belongs to its publisher; read the full piece at the link above._