The Insurance Brokers Association of India (IBAI) has raised alarms over proposed IRDAI reforms, warning they could lead to 10 lakh job losses and a 60-70% drop in broker revenues, impacting policyholder advocacy and claim assistance.
The Insurance Brokers Association of India (IBAI) expressed deep concern on Tuesday over proposed regulatory changes to the insurance distribution architecture, warning that sweeping overhauls could trigger widespread job losses, risk policyholder advocacy, and lead to unintended macroeconomic consequences.
Board members and Directors of IBAI held a press conference at IMC Chambers in Mumbai on Tuesday, where they addressed media queries regarding the Insurance Regulatory and Development Authority of India's (IRDAI) proposed reforms.
Job Losses and Socio-Economic Risks
Highlighting the socio-economic risks, IBAI noted that the distribution channel employs roughly 83 lakh people. Industry estimates suggest a 60–70% drop in broker revenues could result in at least 10 lakh job losses while severely under-serving MSMEs and small policyholders who rely on independent intermediaries for claim settlement assistance.
Policy Design and Claim Disputes Explained
Sumit Bohra, Ex-President, IBAI, clarified that the distinction stems from policy design rather than systemic bias. "A group policy is tailor-made where pre-existing diseases—the main gray area for disputes—are covered from day one. In contrast, individual policies carry waiting periods of two to four years. The maximum disputes occur during these initial years. Moreover, deduction issues often involve non-payable medical expenses prescribed by the regulator rather than total rejections," Bohra explained.
Vital Role of Professional Brokers
Responding to queries on policy literacy and mis-selling risks, S Mohan, Vice President, IBAI, emphasized the vital role played by professional brokers in advising buyers through complex policy clauses. "Insurance is sold, not bought over the counter. It calls for professionals who take the time to explain clauses so policyholders are fully aware before signing. That is why an independent channel representing policyholders must exist," Mohan stated.
Call for Cautious Implementation
The association voiced alarm that the proposed overhaul represents an unprecedented global model with no established benchmarks. While supporting IRDAI's ultimate goals of lowering pricing and driving penetration, IBAI urged the regulator for a longer glide path and an independent third-party impact assessment before implementation.
IBAI pointed out that Indian policyholders already receive ₹84.4 to ₹87 in claims for every ₹100 of premium paid—significantly higher than the global average of 72–75%. Meanwhile, overall industry Management of Expenses (EoM) stands at 26.5%, well within the 30% regulatory cap.
Concerns Over Mandatory Commission Disclosures
On mandatory commission disclosures, IBAI warned that mass public disclosures risk triggering widespread illegal rebating under Section 41 of the Insurance Act. The association urged IRDAI to align with global standards, which mandate disclosure upon customer request for traditional products, reserving upfront disclosures primarily for investment-linked plans like ULIPs.(ANI)
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