Insurance must grow 1.5-2x faster than GDP: Irdai chief Ajay Seth

India’s insurance sector must grow 1.5-2 times faster than the economy over the next 10-15 years, requiring fundamental changes in claims management, product transparency and distribution, said Ajay Seth, Chairman of the Insurance Regulatory and Development Authority of India (Irdai), at the Business Standard BFSI Insight Summit here. 

Life insurance is growing at about 10 per cent, broadly in line with nominal economic growth, while general insurance is expanding at 1.3 times the economy’s rate, driven largely by health insurance. Rising customer dissatisfaction in health insurance, however, underscores the need to improve policyholder experience, Seth said. 

The regulator’s priorities include faster, fairer claims settlement, clearer product disclosures and a more efficient digital purchasing journey. Insurers serve the top 10-15 per cent of the population reasonably well, but reaching the top 50 per cent will require a fundamental shift in how they operate, he said. “Instead of focusing only on penetration and insurance density, we should track the number of lives covered and the effectiveness of the cover provided for every rupee spent,” Seth said. 

Proposed distribution reforms aim to lower acquisition costs and ease pressure on premiums. Average health insurance commissions, including new business and renewals, stand at about 24 per cent and could fall to 15-20 per cent, Seth said. The consultation paper proposes higher commissions for new policies than renewals, while treating policy portability as a renewal for commission purposes. 

“A significant part of health insurance is a pull product rather than a push product,” Seth said, citing rising healthcare costs as a key demand driver. Families generally renew policies unless under significant financial strain, he said, adding that renewals require less effort than acquiring new customers. 

Intermediaries have raised concerns about the proposals’ impact on customer servicing. Seth said Irdai was consulting stakeholders to build consensus before finalising reforms. 

He also highlighted shortcomings in claims disclosures. Conventional settlement ratios do not show what proportion of premiums is paid out in claims or how quickly insurers approve hospital admissions and discharges. Improving access to such information will be a regulatory priority. 

The proposed Bima Sugam digital platform is expected to offer motor insurance first, subject to regulatory changes. It aims to let customers compare and buy policies at lower cost, with fees capped at 5 per cent of premiums.