Stories
IRDAI Chief Ajay Seth Pushes for Efficiency, Cost Cuts in Insurance Sector with New Rules
- •IRDAI Chairman Ajay Seth's consultation paper aims to make the entire insurance sector more efficient and productive, not just reduce distribution costs.
- •The proposals on expenses and segmental commission limits are driven by rising business costs, with the goal to restore and improve efficiency levels seen six to eight years ago.
- •The framework seeks to increase competition by lowering entry barriers and creating more opportunities for distributors, including differentiated commission limits for open vs. closed architecture platforms.
- •Additional commission provisions for smaller towns and cities, along with expanding the POSP network, are intended to improve insurance access in underserved areas.
- •Seth emphasized that the ultimate objective of the reforms, including commission adjustments, is to improve value for policyholders and ensure greater cost efficiency, especially in health insurance.
Key Questions Answered
IRDAI Chairman Ajay Seth stated that the consultation paper aims to make the entire insurance sector more efficient, productive, and cost-efficient, rather than focusing solely on distribution costs. The proposals seek to align the economics of insurers, distributors, and the regulator with the best interests of policyholders.
The distinction is based on open versus closed architecture. Insurance distribution entities (IDEs) operate in open architecture by selling competing products from multiple entities, making customer choice easier, whereas insurance distribution persons (IDPs) are tied to a single insurer.
The framework plans to expand the point-of-sale person (POSP) network, enable them to sell more complex and certain non-insurance products, and introduce additional commission provisions for smaller towns. Local networks like common service centres and banking correspondents will also play a larger distribution role.
