Reforms In Claims Management, Grievance Redressal & Products In The Pipeline Says IRDAI Chairman

Mumbai:After releasing the draft on distribution reforms, the insurance regulator is also working on reforms in claims management, grievance redressal and product space which will be out in the next financial year, its chairman Ajay Seth said. Moreover the proposed distribution reforms including the new limits on Expense of Management framework for insurers would be effective January 1 or April 1, 2027 after consultation with the industry, Seth said in an interview to a business news channel.

Giving details, Seth said that the distribution reforms are only one part of IRDAI's broader reform programme. The regulator plans to come up with claims management, grievance redressal and product reforms in the next financial year. The objective is to strengthen trust in the insurance sector and build on the foundation created by the distribution reforms.

“These will build on the work of these (distribution) reforms,” he said.

Last Wednesday, the Insurance Regulatory and Development Authority of India (IRDAI) in a two part consultation paper titled ‘Recaliberating economics of insurance distribution’ proposed an overhaul of the economics and structure of insurance distribution, including lower expense limits for insurers, product-linked commission caps for distributors, greater disclosure of distributor remuneration and a clawback mechanism in cases of mis-selling. The consultation process is currently open for stakeholder comments.

According to Seth, the objective is to create a more efficient insurance industry that can meet the requirements of India's growing economy.

Seth said that he expected insurers to pass on the savings from lower commissions to customers. “This entire exercise (proposed distribution reforms) is intended to ensure that the public and policyholders benefit. For a life insurance savings product, the outcome should be better returns. In general insurance, it should result in better claim ratios. Cost efficiencies should get passed on through lower premiums, or the rate of increase in premiums should be moderated, or returns on savings products should be better than they are today.”

On when the distribution reforms would be effective Seth said, “This is a consultation paper. It will have to be followed by draft regulations, which will also be placed for public consultation, before the final regulations are issued. One possibility is to implement the framework from January 1, 2027, or from April 1, 2027.”