New Delhi, Aug. 3 -- For two decades, India capped the commission an insurer could pay on each product. In April 2023, it removed those caps, allowing insurers to set commissions as their boards decide, subject to an overall ceiling on expenses. While the reform was sound, it has already triggered a backlash. As evidence mounts of intermediaries mis-selling insurance to customers, calls to bring commissions back under control are growing.

Before India reaches for the cap again, however, one question must first be answered: What did two decades of caps actually achieve?

Between 2018 and 2022, while the old caps were firmly in force, tax investigators uncovered what they described as a systemic practice of insurers paying intermediaries f...