Dynamic pricing works for airlines, not insurance, says Irdai Chief

Insurance Regulatory and Development Authority of India (Irdai) Chairman Ajay Seth on Tuesday said dynamic pricing, a practice used by airlines, should not be adopted by insurance digital platforms, as he stressed that such platforms must prioritise policyholders, transparent pricing and product comparisons.

“Dynamic pricing works in airline industries, not in insurance. Every insurer is saying, ‘Come, we are ready to serve you.’ There should not be any opportunity for dynamic pricing on a digital basis,” Seth said at the fifth edition of the Business Standard BFSI Insight Summit 2026 in Mumbai.

Seth was speaking during a discussion on ‘The financial sector’s role in India’s growth story’, moderated by Business Standard’s A K Bhattacharya.

His remarks came as Irdai examines proposed changes to insurance distribution practices, including commission structures and insurers’ expenses, through its consultation paper, ‘Recalibrating Economics of Insurance Distribution.’

Seth said online aggregators and digital platforms play an important role in helping customers compare insurance products and make informed decisions. However, he said platforms must remain focused on policyholders rather than expanding into multiple business models that could dilute their primary objective.

“Online aggregators or digital platforms play a very significant role. It is a good model in our digital journey because people can compare and then decide. First of all, the product has to be simplified so that people can compare and take a decision,” he said. 

He said some platforms had expanded into physical distribution, including through on-ground teams, while also offering digital services. Such activities, he said, had different business dynamics from a purely digital model.

“The focus of any digital platform has to be on the policyholder. The policyholder should get a good product that they understand, at the lowest price,” Seth said.

He also raised concerns about platforms seeking customers’ personal details before displaying prices and asking them to provide their mobile numbers for follow-up calls.

“The basic principle of any digital platform is that customers should be able to compare prices without providing personal details,” he said.

Seth said some platforms also sought exemptions from the Department of Telecommunications’ Do Not Disturb requirements to contact prospective customers.

“There is a need for guardrails to be brought in. The question of how much commission should be paid follows from there,” he said.

The regulator’s consultation paper proposes changes to insurance commission structures and expense limits. Irdai has extended the deadline for stakeholder feedback to October 31, 2026, after receiving more than 650 submissions. The paper was released on September 23, 2026.

Addressing concerns about the proposed changes, Seth said the regulator was consulting industry participants, distributors and policyholder representatives before deciding the way forward.

“I had promised that I would have an open mind, generate discussion based on data and analytics, and attempt to build consensus for the reforms needed for the sector and our economy. I reiterate that commitment,” he said.

He said Irdai had been meeting stakeholders to understand their concerns and assess the proposals.

“A reform of this nature has to be built on consensus. It cannot be just about writing another set of regulations,” Seth said.

On health insurance commissions, he said the consultation paper proposed higher commissions for first-time sales and lower commissions for renewals, as acquiring a new customer generally required more effort than renewing an existing policy.

He said the average commission in the health insurance sector was about 24 per cent across new and renewal business. The proposals sought to bring this down to around 15-20 per cent.

Seth said high distribution costs could leave less money available in the pool used to meet claims and other expenses, potentially putting upward pressure on premiums.

On portability, he said the regulator was examining how commissions could influence customers’ decisions to switch insurers. The consultation paper proposed allowing commissions on ported policies at the same level as renewal commissions.

Seth also said the insurance sector would need to grow faster than the economy if India achieved sustained economic growth of 8 per cent.

“If India is growing at 8 per cent, the insurance sector needs to grow 1.5 times or maybe twice as fast for 10 to 15 years,” he said, citing the sector’s large unmet demand.

He identified claims management, transparency and digital adoption as areas requiring attention.

He said customers needed clearer information about insurance products, the effective coverage offered and the returns available on savings-linked policies.

Seth said the industry also needed to improve the customer experience, particularly in health insurance, where customer dissatisfaction remained a concern.

He said the sector had to look beyond conventional measures such as insurance penetration and density and focus more on the number of people covered and the effectiveness of that coverage.

“From an economic perspective, the lens has to be how many lives are covered, how many economic entities are covered, and what kind of effective cover is provided per rupee spent,” he said.

Seth said wider insurance coverage would require simpler products suited to different income groups, alongside improvements in affordability, quality and service.