Life Insurers Back Irdai’s Goals but Not Its Clock, Seek Longer Transition for Distribution Reforms
IRDAI: Life insurers support IRDAI’s reform objectives but want more time to adapt their distribution models, citing the need for a smoother transition.
IRDAI proposed distribution reforms have received support from life insurers, who are seeking a longer transition period to implement the changes.
NEW DELHI – IRDAI: Chiefs of leading life insurance companies have asked the Insurance Regulatory and Development Authority of India (Irdai) to allow a longer transition period for its proposed distribution reforms. They said insurers differ widely in size, business model and distribution reach.
At an industry summit in Mumbai, the executives supported the overall objectives of the regulator’s consultation paper but pressed for revisions to the proposed timelines and commission structures.The draft norms aim to curb rising distribution payouts and overall costs, and to address concerns over policy persistency.
IRDAI: Expense limits and the implementation timeline
The consultation paper proposes capping life insurers’ expenses of management at 15 per cent within two years and 12.5 per cent within five years. The proposed start date is April 1, 2027. According to Irdai data, the private life insurance sector’s expense ratio was 20.2 per cent in FY26.
Industry leaders said meeting these limits could require a significant reworking of business models. Their main concern is that cutting costs too quickly could limit insurers’ ability to invest in distribution, extend their reach and grow premium income.
Kamlesh Rao, MD and CEO of Aditya Birla Sun Life Insurance, said the key question is whether the proposals mark the end point of reform or only the beginning. He said a gradual reduction in expenses, including distribution payouts, would let insurers sustain growth while delivering more value to customers. Whether the period is three, five or seven years, he said, the objective can be met so long as the industry is moving in the right direction.
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Mahesh Balasubramanian, MD of Kotak Life, said the focus should be on an orderly transition rather than on negotiating individual figures. He noted that reform brings short-term disruption, and that insurers need time to assess the immediate impact on their businesses.
Rushabh Gandhi, MD and CEO of IndiaFirst Life Insurance, suggested a longer glide path for the proposed cost limits. He also asked for commissions to be reviewed product by product. In his view, commissions on deferred annuity products could be raised modestly to support the pension segment. He added that the proposed commission structure for unit-linked insurance plans (ULIPs) could be hard to implement within the existing reduction-in-yield constraints. Gandhi described pension products as vital for the country, given the absence of widespread social security.
Alok Rungta, MD and CEO of Generali Central Life Insurance, described the proposals as a wider reset of how the industry operates rather than a set of changes to distribution rules alone. He said the regulator would need to consider insurers’ different starting points when setting implementation timelines. He also stressed the need for patient capital, since building distribution networks, especially in smaller towns and underserved markets, takes time and sustained investment.
IRDAI: Mis-selling, persistency and distribution channels
The executives also addressed concerns over mis-selling and policy discontinuation. Gandhi said the scale of the problem had been somewhat overstated, noting that insurers have tightened their controls over the years. Measures he listed include suitability checks, validation calls before policy issuance, video-based consent, and the use of data analytics to screen agents and flag possible fraud.
Balasubramanian said complaints and lapses should be seen in the context of life insurance being a long-term savings product. Customers may revisit their financial commitments after a few years without having been missold, he said, adding that insurers and distributors share responsibility for reducing mis-selling.
Rao pointed to an industry claim settlement ratio of 97.6 per cent. He said insurers paid out six to eight times the claims they had anticipated during the Covid-19 pandemic without needing government or regulatory support. He also cited the 30-day free-look period, which lets policyholders return a policy that does not suit them.
Rungta said the regulator should ensure the reforms do not disproportionately weaken the traditional agency channel, which demands heavy investment in branches, people and training. While bank-led distribution has helped insurers widen their reach, he said, different channels need to coexist.
IRDAI: Credit-life cover under review
The panel also discussed the proposed restrictions on credit-life insurance, which covers a borrower’s outstanding loan if the borrower dies. Gandhi said the product plays an important role in expanding coverage and can protect families from inheriting large debts. He pointed to the size of group credit-life coverage as evidence of its reach.
Rao said credit-life is among the largest sources of policy volumes after the Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY). He acknowledged that commission levels may need adjusting but said the product remains important for borrowers and the wider financial system.
Rungta said insurers must guard against forced bundling of policies with loans, but should not lose sight of the protection credit-life offers. He said that when someone takes on a loan, it is the industry’s role to provide cover against the risk, which can spare families a debt burden if the borrower dies.
IRDAI: Growth outlook
The executives said the long-term opportunity for life insurance remains large, supported by more affordable products, better distribution and rising awareness. Balasubramanian said the industry is nearing a phase in which products could become cheaper and penetration could pick up. For now, they said, the challenge is to put the reforms in place in a way that improves customer value without eroding the distribution capacity needed to take insurance across the country.
