India's insurance regulator proposed new rules last week to reintroduce product-level commission caps and tighten expense management limits, reversing a 2023 move that allowed insurers flexibility. This comes after India permitted 100% foreign ownership in the sector last December, attracting global insurers. The proposals require private life insurers to cut total management expenses from 20% to 15% within two years and to 12.5% within five years, and general insurers to reduce it from 30% to 20% over five years. Currently, 20 of 22 life insurers and 28 of 31 general insurers are above the proposed FY29 expense ceiling. Following the announcement, India's largest online insurance platform PB Fintech saw shares crash 36%, HDFC Life fell over 6%, and ICICI Life Insurance dropped 4%. Citi estimates the new rules could compress insurance distribution economics for banks and non-banking financial companies by 70%-90% in several high-margin categories. Experts warn that frequent policy shifts create operational complexities, potentially causing foreign investors to pause expansion plans, despite India's low insurance penetration (3.7%) offering long-term promise.