On September 23, 2026, IRDAI released a public consultation paper on the economics of insurance distribution. Among its proposals, commission limits could vary by product, channel, complexity, and the effort involved in selling and servicing a policy. The paper also proposes documenting customer needs and suitability, linking the individual seller to the policy, and allowing commission clawbacks where mis-selling is established.
These are proposals, not final rules. Still, they raise an operating question that interests me: if insurance commissions depend partly on effort and conduct, what record shows the work that actually occurred?
A sales record proves that a policy was issued. It does not necessarily show why the product suited the customer, which person gave the advice, what service was promised, or what happened after issuance. An effort-based commission model would make those details more relevant to distribution operations.
The commission record would need more than a payout
A commission system usually needs enough information to calculate who receives what. An effort-based framework would also need to explain why a particular payment treatment applied.
Product and channel are structured fields. Complexity and service effort require more context. A complex product cannot simply be labelled complex without a consistent rule. Servicing effort cannot be inferred from the number of emails sent or calls logged.
The working record would need to connect the policy, seller, customer need, suitability assessment, expected service, and material actions completed. If a higher commission reflects more work, the record should identify the work that justified it. If a lower rate applies to a simpler sale, the system should show which classification rule produced that result.
This is my interpretation of the proposal’s operational consequence. The consultation paper does not prescribe this exact software design.
Suitability needs a reviewable trail
A suitability field marked yes does not explain the recommendation.
A useful record can show the customer need captured at the time, the relevant product features, the basis for the recommendation, the person responsible, and any question that required another review. It should preserve the source material used in that assessment and the version of the product information available on the decision date.
The aim is not to turn advice into a long transcript. The record should make the important reasoning inspectable. A later reviewer should be able to see what the seller understood, what remained uncertain, and whether the customer’s instruction changed before issuance.
This connects to relationship-based insurance advice. Relationship context can improve preparation, but the final recommendation still needs an accountable record. A private memory held by the adviser cannot support conduct review unless the relevant parts enter the case file.
Servicing effort should be attached to the policy
Servicing happens through specific work after the initial sale. A customer may need help with an endorsement, renewal change, document correction, or claim preparation. These examples are workflow hypotheses, since the consultation does not define a universal list of qualifying service actions.
The system should distinguish a material service action from routine activity. Logging into a case or sending an automated reminder does not show that the customer received useful support. A completed endorsement request, a resolved policy error, or a documented claims handoff has a clearer relationship to the policyholder’s need.
Each material action should carry an owner, date, source, outcome, and any open dependency. That makes the servicing record useful even if commission treatment changes later. It also helps the next operator continue the work without reconstructing every exchange.
The record should preserve failed service attempts too. An unanswered request or unresolved correction is part of the current state. Hiding it because no successful outcome occurred would overstate the service delivered.
Seller identity should survive every handoff
The consultation proposes linking the individual seller’s identity to each policy. The implementation question is what happens when several people contribute to the sale and later service.
One person may introduce the customer. Another may collect information or explain the product. An operations colleague may prepare the application. A servicing team may handle later changes. The policy needs a clear responsible seller while the work record preserves the other roles.
This matters if a conduct issue appears later. The team should be able to trace the recommendation, customer confirmation, application changes, and relevant handoffs without treating every participant as the seller. A seller identifier without the surrounding workflow may create accountability on paper while leaving the actual decision hard to reconstruct.
A similar problem appears when insurance information changes channels. Preserving the source of an insurance answer helps show who supplied a fact and how it changed. The distribution record adds another layer: who relied on that fact when recommending and servicing the policy?
Clawbacks require a link to the original conduct
A commission clawback following established mis-selling would need a reliable connection between the conduct finding and the payment being reversed.
That connection should begin at the original sale. The record can link the seller, policy, suitability evidence, remuneration rule, review outcome, and any later correction. If the issue concerns compulsory bundling or an inaccurate recommendation, the system should preserve the specific finding rather than use a vague conduct flag.
Automation can assemble this record, detect missing fields, and route a case for review. It should not decide that mis-selling occurred. That conclusion can involve facts, interpretation, and authority that sit outside a data extraction task.
The agent should also avoid scoring advisers through crude activity volume. A high message count may reflect confusion. A low count may reflect a simple, suitable sale. Useful controls inspect the evidence and workflow state instead of rewarding visible busyness.
Distribution software may need to prove service
If the consultation becomes regulation, one product implication is that distribution software may have to do more than acquire leads and calculate payouts. It may need to preserve the evidence behind suitability, seller attribution, servicing effort, and conduct review.
That is still a hypothesis. The final framework may change after consultation, and firms may meet its requirements through existing systems or manual controls.
I would test the idea on one servicing workflow. Follow a policy from the recorded need through recommendation, issuance, one post-sale request, and closure. Then ask whether another reviewer can identify the responsible seller, understand the service delivered, and trace any commission treatment to a visible rule.
The test should count missing evidence, disputed ownership, reopened work, and manual reconstruction. If the record cannot explain the service, an effort-based payment model may add classification work without improving accountability.