IRDAI Chairman Ajay Seth Announces 6 Major Reforms over next 4-6 months:
1. Overhauling distribution and cost structures
• High distribution cost affect Insurance affordability - renewal of old policy should cost less in commissions than finding a brand-new customer. the regulator is aligning commissions with long-term value rather than short-term sales. Lowering systemic costs can make products more affordable, improve value for policyholders and strengthen insurers’ sustainability.
2. Launch of "Bima Sugam"
• A new digital marketplace (expected by May 2026) where you can compare different insurance policies in one place. Competition will likely drive down costs for consumers.
3. Digital Public Infrastructure (DPI) - discussion paper being prepared:
• This is a secure, digital system for policy and claims data. It will allow for faster insurance approvals, easier switching between companies (portability), and better fraud detection.
4. Better Accounting standards
• Another reform is adoption of Indian Accounting Standards for insurers from the next financial year, aligning reporting with international standards.
5. Better Financial standards
• Developing dynamic Risk-Based Capital framework that replaces the current formula-based solvency regime.
6. Higher transparencies to generate trust
• Companies to publish more data on their returns, claims, and settlements, so that Insurers can make a better choice.
OUR VIEW:
As mentioned in the Union Budget 2026-27, the Sabka Bima Sabki Raksha Act (2025) aims to make insurance cheaper and more available by inviting more players into the market, through initiatives like 100% Foreign Investment, lower Entry Barriers and less Paperwork. In our News Summary, we had highlighted that report, along with reviewing its impact on the Regulatory space. The issues on high costs, along with low settlement claims and falling trust of Insurers have been flagged over last few months by the Regulators themselves. These have been posted in our website and analysed.
The "Bima Sugam" scheme mentioned has been in abeyance for quite some time. It was however good to note that now, a timeline of May 2026 has been given for its launch. Again, mention of discounts in old policies have been there. However, those holding onto old policies do get discounts in form of "No claim Bonus". So, it will be interesting to see in what other way, the prices can come down - especially for the old policies: and to some extent, the new policies too. With rising International competition expected in coming months from 100% FDI, the newer products from there, can be expected to be not only cheap, but also having better service and more variety in the products.
The Insurance sector needs to get all its acts together - the sooner, the better
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Link - https://www.financialexpress.com/money/insurance/regulator-plans-major-steps-to-lower-insurance-costs/4154691/
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