Buying insurance could become more transparent and, potentially, cheaper. But there is another side to the proposed changes that policyholders need to watch.

The Insurance Regulatory and Development Authority of India (IRDAI) has proposed a major overhaul of how insurance is sold in India. The plan includes caps on commissions paid to agents, banks and brokers, lower expense limits for insurers and tighter rules to prevent mis-selling.

The proposals are still being discussed and could change after feedback from the industry and other stakeholders. But the question is -- if implemented, will these changes actually reduce the cost of insurance and make buying a policy easier?

Will Insurance Premiums Get Cheaper? 5 Proposed Changes Buyers Should KnowIRDAI has proposed restrictions on reward-linked incentives for bank, NBFC employees selling insurance.

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IRDAI's Insurance Overhaul Proposal: Buying insurance could become more transparent and, potentially, cheaper. But there is another side to the proposed changes that policyholders need to watch.

The Insurance Regulatory and Development Authority of India (IRDAI) has proposed a major overhaul of how insurance is sold in India. The plan includes caps on commissions paid to agents, banks and brokers, lower expense limits for insurers and tighter rules to prevent mis-selling.

The proposals are still being discussed and could change after feedback from the industry and other stakeholders. But the question is -- if implemented, will these changes actually reduce the cost of insurance and make buying a policy easier?

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Under the new proposal, commissions would vary depending on the type of policy, distribution channel, policy size and the effort required to sell and service it. For example, commissions on several life insurance products could be significantly lower than the levels currently seen. Health insurance commissions would also face tighter limits. For third-party motor insurance on new vehicles, the proposal is for no commission to be paid.

If it costs insurers less to sell a policy, there could eventually be room for lower premiums. But lower commissions do not automatically mean lower premiums. Insurers would still have to pass those savings on to customers.

Kunal Gupta, Co-founder and CEO of EMotorad, told NDTV commission caps could reduce the cost of distributing insurance, but the benefit to customers would depend on whether insurers pass on those savings.

"For a customer buying an electric cycle, insurance should be an informed choice," Gupta said. "They should be able to see clearly what the policy covers, what it costs and how to make a claim."

He added that a simpler and more transparent buying process could help customers choose insurance based on the protection it provides rather than the incentive behind the sale.

Source: ndtv