Parliamentary committees on insurance must expand scope, sharpen focus

As India's insurance sector evolves, experts call for a dedicated parliamentary panel to address emerging risks, consumer protection and regulatory gaps

In 1993, the government set up the R N Malhotra Committee — a step that went on to redraw the contours of the insurance sector. It helped break the 1950s-style state monopoly and invited private participation, including foreign players through joint ventures. This laid the groundwork for the industry’s modern architecture and the Insurance Regulatory and Development Authority of India (Irdai).

 

Three decades later, the insurance ecosystem has evolved from being a close-knit regime to a globally competitive market, yet legislative oversight continues to sit within committees with wide mandates, such as the Standing Committee on Finance.

 

Just as the 1990s economic reforms were born from the need to bridge global gaps, an analysis of issues before parliamentary committees in the insurance sector today provides the depth and agility needed to tap the potential of the next wave of capital and innovation. Such analysis is an integral part of public policy, as government-backed schemes alone cover more than 500 million people. We are today dealing not only with financial risks but also with climate resilience and social protection for gig workers in the informal sector. Compared to many developed economies with broad social security systems, financial protection against health and livelihood shocks still relies on insurance, which strengthens the case for a focused parliamentary committee.

 

Insurance is also increasingly embedded in lending and the digital economy, blurring regulatory boundaries and raising new questions on consumer protection. Also, the growing cross-border exposure of domestic insurers highlights the need for a parliamentary committee for evolving risks. It’s essential to see this from the consumer’s view and focus on better transparency, customer service, claims experience and safeguards against misselling.

 

Parliamentary committees have made several suggestions in reports that are visible in how the insurance sector functions today. One can begin by looking at the 17th Lok Sabha’s Standing Committee on Finance’s 66th report and the seventh report of the 18th Lok Sabha that reviewed the insurance sector and examined the action taken on earlier recommendations. Both reports made two major recommendations.

 

First, as we move toward a more liberalised insurance sector, the committee’s 66th report recommended stronger solvency monitoring and a gradual risk-based regulation to ensure that insurers could meet long-term liabilities and avoid systemic risk. The seventh report reviewed the progress and we can see its impact in the 150 per cent minimum solvency ratio and the enterprise risk management system enforced by the Irdai.

 

Second, the 66th report recommended strengthening policyholder protection and transparency to address misselling, opaque policy structures and weak grievance redressal mechanisms. The seventh report examined the steps taken on these issues. Today, we have an integrated online grievance system in the form of the Bima Bharosa System (formerly the Integrated Grievance Management System). Major standardised products include health plans, life insurance plans and property insurance plans.

 

One can also look at the Committee on Public Undertakings. In a study on the insurance sector, the committee in its 11th Report in 2006 pointed out the need to expand insurance coverage nationwide. One can see its implementation in the form of Rashtriya Swasthya Bima Yojana (2008) and the Ayushman Bharat Yojana (2018). In its 13th report, the committee suggested the need for technology adoption in the insurance sector. Today, we can see online policy issuance as well as digital processing of claims.

 

While parliamentary committees have contributed to analysing the performance and growth of the insurance sector and Irdai, there is an increased need for dedicated studies on thematic issues. For instance, an important area where committee study could be helpful is the misselling in insurance. If parliamentary oversight can be specialised in other areas such as climate and catastrophe insurance structure, it will lead to a much more robust insurance ecosystem in the years to come.

The writers are, respectively, group legal and regulatory compliance head, Policybazaar, and research fellow at the Policy, Politics and Governance Foundation