Insurance Distribution Reforms Will Hurt Policy Holders, Cut Jobs & Growth

Mumbai: The insurance regulator’s proposed distribution reforms will hurt policyholders, lead to job losses and slow insurance industry growth, the Insurance Brokers Association of India (IBAI), the apex body of India’s 798 licensed insurance brokers, has said.

In a statement the IBAI said that it supports the regulator’s stated objectives of policyholder protection, transparency, curbing misselling and wider insurance coverage. It also supports several measures in the paper, including the prohibition of compulsory bundling of insurance with loans, enforceable suitability obligations, claw-back of commission for proven mis-selling, transparency of related-party payments and identity tagging of salespersons. However, it opposes the central elements of the proposed framework, more than 30 commission caps across products and distribution channels and a one-third reduction in insurers' overall expense limit.

The association also said that the consultation paper identifies high commissions as being concentrated in captive channels, where customers have limited choice, but proposes caps across channels, including independent brokers. It has urged IRDAI to retain the 2023 expense-of-management framework, with tighter computation rules if required; confine caps to credit-linked and other coerced-choice sales where the paper’s evidence is strongest.