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Insurance CEOs have backed IRDAI's proposed distribution reforms but want a phased rollout instead of a uniform approach. They say gradual implementation will help protect growth while improving affordability, transparency and customer outcomes. What changes could make the final framework more effective?
India's leading insurers have broadly welcomed the Insurance Regulatory and Development Authority of India's (IRDAI) proposed overhaul of insurance distribution rules but have urged the regulator to adopt a phased implementation to minimise disruption. Industry executives said the direction of the reforms is positive, but the pace and structure will be critical for insurers, distributors and customers. Amit Jhingran, MD & CEO of SBI Life Insurance, Parag Raja, MD & CEO of Bharti Life Insurance, and Parthanil Ghosh, MD & CEO of HDFC Ergo, said the consultation paper could improve transparency and affordability while creating a more customer-centric distribution model.
They also expect the final framework to evolve after industry feedback before implementation. The IRDAI consultation paper proposes hard commission caps, tighter expense of management (EOM) limits, greater transparency and accountability in insurance distribution, replacing the flexibility introduced in 2023 after the regulator concluded that the earlier framework had not delivered adequate cost discipline. Industry backs reforms, seeks a glide path Bharti Life Insurance's Parag Raja stressed that the industry should remember the proposals are still under consultation.
"This is a consultation paper," Raja said, adding that the regulator is genuinely interested in listening to all stakeholders before taking a final decision. While supporting the overall direction, Raja argued that implementation should not follow a one-size-fits-all approach. He proposed a graded EOM structure based on an insurer's size, scale and business model, similar to the tiered expense framework followed in the mutual fund industry.
Smaller and mid-sized insurers, he said, need additional flexibility to absorb fixed costs while they scale up operations. SBI Life says 2023 framework did not work SBI Life Insurance MD & CEO Amit Jhingran said the regulator's decision to reintroduce commission caps was driven by the industry's experience under the 2023 framework. "The industry did not respond very positively to that," he said, adding that this made the return of commission caps necessary.
Jhingran noted that SBI Life's commission structure is already broadly aligned with the proposed framework and expects only limited operational disruption. However, he welcomed proposals around customer disclosures, transparency and governance, calling them "positive disruptions." HDFC Ergo expects operational changes HDFC Ergo MD & CEO Parthanil Ghosh said insurers will need to make significant operational adjustments if the proposals are implemented. He estimated that companies may have to rework 30-40% of their processes, including distribution systems, technology platforms and consent management, to comply with the new rules.
Ghosh also argued that the regulator should review the proposed EOM limits after five years to assess whether they have improved insurance penetration, customer outcomes and grievance redressal. Focus remains on affordability and penetration The executives agreed that the regulator's broader objective of making insurance more affordable and accessible is aligned with the industry's long-term goals. They also noted that expanding insurance coverage, particularly in rural India, will require continued investment in technology and physical distribution networks, and urged the regulator to balance lower distribution costs with the investments needed to improve penetration.
For the full interview, watch the accompanying video Catch all the latest updates from the stock market here (Edited by : alphadesk) Home Personal Finance News IRDAI's insurance reforms need phased rollout, not one-size-fits-all approach: Industry CEOs
Source: CNBC TV18
