Concerned over unreasonably high insurance premiums, seek faster claims disposal to boost coverage: DFS Secy

Insurance amendment act likely to be announced in the upcoming monsoon parliamentary session

The government is concerned about unreasonably high insurance premiums in the country and is pushing for faster and fairer disposal of claims to improve insurance penetration and rebuild consumer trust, Financial Services secretary M Nagaraju said on June 27.

“There is a need to curb insurance misselling and ensure that premiums in India are low so that coverage can increase,” Nagaraju said on the sidelines of the signing ceremony of joint venture between Central Bank of India and Generali in the insurance sector. He added that timely and fair settlement of insurance claims is critical to restoring faith in insurance products.

The government’s remarks come at a time when the Centre has nudged the Insurance Regulatory and Development Authority of India (IRDAI) to scale up inspections of insurance companies and penalise those flouting norms, particularly in the health insurance segment. Moneycontrol had reported on June 19 that the IRDAI has been asked to intensify its scrutiny and enforcement to ensure that insurers adhere to fair practices.

Misselling

“India’s insurance premiums are very high and unreasonable. We need to ensure insurance premiums are low, and that there is no misselling of insurance products,” he said. The high cost of insurance, along with delays in claim settlement, has been identified as a key reason for low insurance penetration despite India’s growing middle class and rising awareness about financial protection.

Misselling is the unethical practice of selling insurance products to consumers without ensuring suitability or full disclosure of terms.

The government’s broader objective is to expand insurance coverage across sectors, particularly in health, where out-of-pocket medical expenses remain a major burden on households.

The IRDAI has already taken several steps in recent months to improve transparency and tighten supervision of insurers. However, the government now wants the regulator to enhance monitoring and penalise those companies found to be violating consumer protection norms, particularly in claim settlement timelines and policy disclosures.

The government has asked IRDAI to ensure that the regulation of one-hour timeline for pre-authorisation approvals — a critical step for cashless hospitalisation – is met by insurers.

Insurance penetration in India — measured as insurance premiums as a percentage of gross domestic product (GDP) — remains far below the global average. High premium rates, product complexity, and instances of misselling have contributed to consumer scepticism.

Fair and efficient claims processing is also seen as essential to improving the credibility of the insurance sector.