‘Only 48% of life policies are renewed for over 5 years’
The IRDAI is implementing new reforms to curb mis-selling in the life insurance sector by linking agent commissions to policy persistency and transparency. Chairman Ajay Seth noted that only 48% of policies are renewed for over five years, prompting a shift toward more sustainable distribution models.
Why it matters
These regulatory changes aim to protect consumers from predatory sales practices and improve the long-term stability of the insurance market.
IRDAI is tightening action against mis-selling, with penalties linked to the severity of violations and harm caused. Its proposed distribution and commission reforms aim to remove incentives for mis-selling. In an interview with TOI, chairman Ajay Seth explains the changes. Excerpts:What is the intent behind the consultation paper on distribution; is it to stop mis-sellingThe intent is fourfold: expanding coverage, improving affordability, enhancing accessibility, especially in underserved areas and economic segments, and generating employment. The specific objectives are to remove regulatory arbitrage, bring more entities and persons into distribution, make the sector cost-efficient, incentivise good market conduct and enhance transparency. Addressing mis-selling is integral to this, but it is not the only driver. If you look at the structure, high upfront commission on first-year premium induces mis-selling and a high proportion of surrenders; only about 48% of life policies reach the 61st month.
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