New Delhi, Oct. 3 -- The past couple of weeks have been rather painful for the insurance industry. The regulator, which has the dual responsibility of developing and regulating the sector, has clearly shifted its focus towards policyholder protection. But before moving to rein in distributor commissions, it laid out its rationale with numbers-and those numbers made a strong case for intervention.

In its draft proposal, Recalibrating the Economics of Insurance Distribution, the Insurance Regulatory and Development Authority of India (Irdai) published data highlighting the high cost of running an insurance business in India, a significant part of which comprises commissions and incentives paid to distributors. Among the insurers sampled by...