Leaderless and lagging: India's insurance overhaul stalls without Irdai head since March

Time of India

06-06-2025

Key reforms in India's
insurance
sector are stuck in limbo following the departure of Insurance Regulatory and Development Authority of India (
Irdai
) chairman Debashish Panda in March. With the top post still vacant since March, the sector is left without regulatory leadership at a time when several major initiatives are awaiting rollout, Times of India reported.
The most ambitious of these is
Bima Sugam
, a centralised digital platform designed to allow customers to compare, purchase, and manage insurance policies online. Although each insurance company has already invested a few crore rupees into the development of this platform, the date of its official launch has still not been finalised.
Alongside Bima Sugam, two other major initiatives—Bima Vistaar and Bima Vahaak—are also facing delays.
Bima Vistaar
is meant to offer bundled insurance coverage to rural populations, while Bima Vahaak is a distribution model driven by women. Both are facing technical and operational hurdles that have stalled their progress.
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Plans to shift to a risk-based capital framework and align insurance accounting practices with the International Financial Reporting Standards (IFRS) are also in suspension. These changes were intended to modernise the sector's regulatory oversight and financial disclosures. However, industry unreadiness and lack of clarity around implementation have halted progress.
Meanwhile, proposals to allow 100% foreign direct investment in the sector, permit composite licences, and introduce differentiated capital requirements have yet to be passed into law. Plans to list state-run insurers on the stock market are also stuck, facing pushback from within the public sector.
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Even as reforms stall, regulatory scrutiny has increased in some areas. The
Reserve Bank of India
and the finance ministry have raised concerns over banks and automobile dealers forcing customers to purchase bundled insurance products. Regulatory audits have uncovered several worrying practices in retail health insurance, including unclear reasons for claim rejections, steep premium increases, and poor portability.
'If the insurance industry is to grow the way mutual funds did after 2010, we need greater transparency, lower costs, and rebuilt trust,' said Kamesh Goyal, co-founder of
Go Digit General Insurance
. 'Sebi introduced direct plans and standard charges. Insurance could adopt similar guidelines—such as mandating refunds with interest when loss ratios fall below a certain level.'
Goyal said that retail customers were effectively subsidising corporate clients. 'We're not saying distributors shouldn't earn, but loss ratios at 10% are unsustainable. A level of 60-65% is more realistic, accounting for costs and investment income. Once a fair value proposition is in place, mis-selling naturally comes down,' he said.
Public sector insurers are also under pressure. Three have breached solvency norms. Even though insurance premiums have grown, the number of individual policyholders has stayed flat, which limits any real gains in financial inclusion.
Surety bonds are another area that now demands regulatory attention. These bonds were introduced as substitutes for traditional bank guarantees. But insurers argue they come with higher risk as they lack the protections banks enjoy under existing bankruptcy laws.
The delay in appointing a new Irdai chairman has slowed down reform at a time when the insurance industry is in urgent need of clear and forward-looking regulation.
(with ToI inputs)