{"id":86736,"date":"2026-10-13T18:27:09","date_gmt":"2026-10-13T12:57:09","guid":{"rendered":"https:\/\/www.nextias.com\/ca\/?p=86736"},"modified":"2026-10-13T18:28:29","modified_gmt":"2026-10-13T12:58:29","slug":"insurance-reforms-india","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/current-affairs\/13-10-2026\/insurance-reforms-india","title":{"rendered":"Insurance Reforms: Need for a Balanced Approach"},"content":{"rendered":"\n

Syllabus: GS3\/Economy<\/strong><\/p>\n\n\n\n

Context<\/strong><\/h2>\n\n\n\n
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  • Recently, the Insur\u00adance Reg\u00adu\u00adlat\u00adory and Devel\u00adop\u00adment Author\u00adity of India (IRDAI),<\/strong> in a con\u00adsulta\u00adtion paper, pro\u00adposed a slew of dis\u00adtri\u00adbu\u00adtion reforms.<\/li>\n<\/ul>\n\n\n\n

    Key Highlights<\/strong><\/h2>\n\n\n\n
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    • Aim:<\/strong> The reg\u00adu\u00adla\u00adtion would put in place a cus\u00adtomer\u00adcent\u00adric, com\u00adpet\u00adit\u00adive, effi\u00adcient and trans\u00adpar\u00adent dis\u00adtri\u00adbu\u00adtion eco\u00adsys\u00adtem, while enabling bet\u00adter and sus\u00adtain\u00adable out\u00adcomes for poli\u00adcy\u00adhold\u00aders, insurers and dis\u00adtrib\u00adut\u00adors.<\/li>\n\n\n\n
    • The key pro\u00adpos\u00adals include<\/strong> recal\u00adib\u00adra\u00adtion of expenses of man\u00adage\u00adment (EoM) through lower lim\u00adits with a phased glide path.\u00a0<\/strong>\n
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      • Expenses of Management (EoM)<\/strong> refer to the total operational, administrative, and distribution costs incurred by an insurance company to run its business.\u00a0<\/li>\n<\/ul>\n<\/li>\n\n\n\n
      • For life insurers, the EoM limit<\/strong> would move to a com\u00adpany\u00ad level basis linked to Gross Direct Premium Income (GDPI), with the limit pro\u00adposed at 15% within two years and 12.5% within five years.\u00a0<\/strong><\/li>\n\n\n\n
      • For gen\u00aderal insurers,<\/strong> the basis would shift from Gross Writ\u00adten Premium (GWP) to domestic Gross Dir\u00adect Premium Income (GDPI), <\/strong>with the EoM limit redu\u00adcing from 30% of GWP to 20% of GDPI within five years<\/strong>.<\/li>\n\n\n\n
      • Other Reforms: <\/strong>The proposals include revising commission norms, easing entry and capital requirements, removing restrictions on non-insurance business opportunities for intermediaries and curbing regulatory arbitrage.<\/li>\n\n\n\n
      • Simplified Distribution Structure: <\/strong>Existing arrangements would be reorganised into three categories: Insurance Distribution Entities (IDEs), Insurance Distribution Persons (IDPs) and Market Infrastructure Institutions (MIIs).<\/li>\n<\/ul>\n\n\n\n

        Concerns Raised by the Insurance Industry<\/strong><\/h2>\n\n\n\n
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        • Insurance Companies:<\/strong> Insurers have expressed reservations about the potential adverse impact of the proposed changes on their operations and business models.<\/li>\n\n\n\n
        • Employment and Competition:<\/strong> Insurance Brokers Association of India (IBAI) has warned that the proposed reforms could lead to job losses, slower industry growth and reduced competition.<\/li>\n\n\n\n
        • Demand for Impact Assessment: <\/strong>IBAI has urged the government to ensure that no commission or expense-limit regulations are notified without a published impact assessment covering policyholders, employment, public-sector insurers and foreign investment.\n
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          • It has also argued that the existing 2023 framework should continue until its scheduled review in 2028.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n

            Indian Insurance Sector (FY24)<\/strong><\/h2>\n\n\n\n
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            • Market Performance:<\/strong> Total insurance premium grew by 7.7%, reaching \u20b911.2 lakh crore in FY24. Reflects continued momentum despite global and domestic economic volatility.<\/li>\n\n\n\n
            • Insurance Penetration: <\/strong>Overall insurance penetration declined slightly from 4.0% in FY23 to 3.7% in FY24. Life Insurance Penetration dropped from 3.0% to 2.8%.\n
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              • Non-Life Insurance Penetration remained stable at 1.0%.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n
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                \"\"<\/figure>\n<\/div>\n\n\n
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                • Future Outlook:<\/strong> The Swiss Re Institute has projected India\u2019s insurance sector to grow at a rate of 11.1% and is expected to become the fastest-growing market among the G20 nations over the next five years (2024-2028).\n
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                  • An expanding middle class, technological advancements, and supportive regulatory measures will likely drive this growth.<\/li>\n<\/ul>\n<\/li>\n\n\n\n
                  • Insurance Companies: <\/strong>At present, there are 24 life insurance companies, and 34 general insurers in the country.<\/strong>\n
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                    • Among the life insurers, Life Insurance Corporation (LIC) is the sole public sector company.\u00a0<\/li>\n\n\n\n
                    • In addition to these, there is a sole national re-insurer, namely General Insurance Corporation of India (GIC Re).<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n

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                      Insurance Regulatory and Development Authority of India (IRDAI)<\/strong><\/h3>\n\n\n\n