IRDAI insurance reforms: New distribution rules only after consensus, says chairman Ajay Seth; What policyholders should know

Speaking at the Business Standard BFSI Insights Summit in Mumbai, Seth said the regulator has been engaging with industry participants following the release of its discussion paper on distribution reforms.

“I'll attempt to build consensus for the reforms needed for the sector and for our economy,” Seth said, according to a PTI report.

The proposed changes have triggered debate around insurance commissions, online distribution platforms and the way customer choices are influenced when buying or renewing policies. For policyholders, the outcome could affect how insurance products are sold, how intermediaries are compensated and how easily consumers can compare available options.

IRDAI distribution reforms: What is the concern over insurance commissions?

However, he also questioned whether commissions could influence customers' decisions when switching between insurers.

Citing trends in health insurance portability, Seth said 60% of port-ins, policyholders moving to another insurer, were concentrated among three entities. The same entities accounted for 20% of port-outs, or customers moving away from them.

He questioned whether commission incentives were influencing these movements rather than customer preferences alone.

“The commission is driving behaviour from one to another,” Seth said, according to PTI.

The comments highlight the regulator's concern that distribution incentives should support informed customer choice rather than encourage policy switching primarily for commercial reasons.

Online insurance platforms under scrutiny

Seth acknowledged the role played by online insurance aggregators in expanding insurance access but raised concerns about certain practices followed by digital platforms.

He questioned the need for consumers to share personal information before receiving premium details and raised concerns about requirements relating to telephone numbers and Do Not Disturb lists.

He also questioned the need for dynamic pricing in insurance distribution.

For consumers, these issues are relevant because the process of comparing premiums, sharing personal data and receiving quotes can influence how easily they evaluate policies before purchasing cover.

The discussion paper's proposals remain subject to the regulator's consultation process and the consensus-building exercise outlined by Seth.

Health insurance claims to be an area of focus

Seth also identified health insurance claims as an area where IRDAI wants to improve the customer experience.

He said the regulator would work towards expediting claims under health insurance policies and pointed out that there was no available information on the time taken to complete hospital admission and discharge procedures under such policies.

According to PTI, Seth described health insurance as the segment with the “maximum dissatisfaction” among customers.

For policyholders, delays during hospital admission, discharge and claim settlement can create financial and administrative difficulties, making faster and more transparent processes an important area for regulatory attention.

Bima Sugam launch expected in the next 30-45 days

Seth also said the launch of Bima Sugam, an online marketplace intended to facilitate insurance transactions, was expected within the next 30 to 45 days. The platform is expected to begin with motor insurance.

If launched as indicated, the marketplace could provide another channel for consumers to access insurance products.

Seth further called for a change in how the industry measures its performance, suggesting that the focus should move beyond insurance penetration towards the number of people covered and the effectiveness of the protection provided for every rupee of premium paid.

He said general insurance had been growing at around 1.3 times nominal GDP growth, while life insurance growth was broadly in line with nominal GDP.

The regulator's next steps on distribution reforms will be important for insurers, intermediaries and policyholders as discussions continue on improving access, transparency and customer outcomes.