Halan Backs IRDAI Overhaul, Urges Hard Deadline to Curb Mis-selling
Monika Halan has welcomed IRDAI's proposed distribution reforms but wants a six-month deadline, warning the industry will otherwise delay change.
Financial educator and author Monika Halan has welcomed the Insurance Regulatory and Development Authority of India's proposed overhaul of insurance distribution, while cautioning that its long transition timelines could let insurers stall meaningful consumer protection.
Speaking about the regulator's consultation paper, "Recalibrating Economics of Insurance Distribution," Halan said the phased implementation stretching over two and five years was too slow. She argued that if the regulator accepts that mis-selling and poor sales practices are widespread, the industry should be given about six months rather than five years, because firms tend to act only when a firm and final deadline is set.
She also flagged mounting resistance from established players, saying a well-funded industry is already lobbying the Ministry of Finance and other centres of power in Delhi to dilute the proposals. She described the effort as a difficult fight, and expressed hope that policymakers recognise its importance for the financialisation of the economy and for ensuring that regulated products are not open to widespread cheating.
At the same time, Halan praised what she called a fundamental shift in the regulator's stance under Chairman Ajay Seth, saying policyholders are finally being placed first after decades of neglect. She noted that every rupee of premium comes from policyholders, yet for 27 years the policyholder was the last concern of the insurance regulator.
She linked high commissions and aggressive distribution models to weak growth, pointing to declining life insurance penetration and stagnant general insurance volumes. A believer in markets and free enterprise, she said profits built on the losses of policyholders harm the country, and that the journey to Viksit Bharat cannot rest on millions of people being cheated of their money.
The consultation paper proposes a three-tier architecture of Insurance Distribution Entities, Insurance Distribution Persons and Market Infrastructure Institutions, along with lower expense caps and reformed commissions. For life insurers, the Expense of Management ceiling would be set at 15 per cent of Gross Direct Premium Income within two years and 12.5 per cent within five years. For general insurers, the limit would fall from 30 per cent of Gross Written Premium to 20 per cent of domestic GDPI over five years. Stakeholder feedback on the paper is open until October 25.