Without open architecture, harder to build sustainable career in insurance: Go Digit's Kamesh Goyal

Edited Excerpts:

Growth in both life and non-life insurance has remained in single digits this year. What are the primary reasons, and what could help revive momentum?

Growth in insurance depends on two key elements: the value proposition of the product and the effectiveness of distribution. When we assess the value proposition, we must consider three stakeholders - customers, distributors, and shareholders. In recent years, we’ve seen a consistent increase in insurers’ Expenses of Management (EoM), which has reduced the value delivered to customers. This is one reason why coverage in both retail health and life insurance hasn’t meaningfully expanded.

On the distribution side, gaps remain. For example, enforcement around mandatory third-party motor insurance is weak in many states, with large numbers of vehicles uninsured due to limited document checks. Additionally, distribution architecture, particularly in agency and POSP channels, remains restricted. Without open architecture, agents and POSPs are limited to offering only one company’s products, which impacts conversion rates and makes it harder to build a sustainable career in insurance.

These issues are interlinked, and unless addressed through thoughtful regulatory and market interventions, growth may remain subdued.

Mis-selling continues to be a concern. RBI recently highlighted that banks earned over Rs 21,000 crore in commissions. Should there be more checks on bancassurance? Is it appropriate for banks to create and distribute insurance products? Why hasn’t IRDAI taken a stance like SEBI’s in mutual funds?

Across the world’s largest insurance markets, tying or bundling insurance with loans is restricted. The reason is clear: the economics often don’t work in the customer’s favour. In India, bundled health insurance products linked to loans typically report loss ratios of 10–15 percent, compared to 70 percent in retail and over 90 percent in employer-employee group health. A similar pattern is seen in term life—loss ratios of 30 percent in bundled, 65 percent in retail, and over 90 percent in group business. This clearly suggests that the bundled customer receives poor value.

Banks, if they believe there’s a risk in their lending, can always insure it themselves at a fraction of the retail cost. That would be more transparent and cost-effective.

Another area worth examining is the alignment between banks and their promoted insurance companies. This model can lead to concentration of business within the group and large fee income for the bank, while also benefiting the insurer and ultimately the group’s valuation. While this structure is permitted, it does raise questions about customer choice and product suitability.
SEBI’s steps in the mutual fund space—such as introducing direct plans and eliminating upfront commissions—are aimed at better alignment with investor interest. A similar review in the insurance space, particularly around bancassurance practices in life and health, is very much required.

Banks which have huge distribution can be a big source for ‘pull’ insurance products than ‘push’.

There’s been a rise in health insurance complaints, especially claim rejections. What’s driving this?

Health insurance is going through a phase of structural stress—both for customers and insurers. A customer who buys a Rs 5 lakh family floater at age 40 may see premiums rise 6–8x by age 55, while inflation steadily erodes the real value of the sum insured. For insurers, claims typically increase after waiting periods expire, pushing up loss ratios and triggering further premium hikes.

Some insurers have begun offering new products with differentiated pricing. Customers who haven’t made claims may be offered more moderate renewals, while those who have claimed may face sharper increases, sometimes leading to discontinuance. This to me is unethical. Practices such as non-transparent deductions at claim stage further add to customer dissatisfaction.

Retail health insurance today requires a fresh, holistic policy approach—one that balances sustainability for insurers and fairness for customers. Incremental fixes haven’t worked.

The IRDAI chairperson position remains vacant, delaying key reforms. What must the incoming chair prioritise?

I wouldn’t wish to comment on the appointment process, but it is clear that several long-standing issues—customer value, distribution alignment, cost structures, and claims experience—require sustained attention. A timely and decisive regulatory push can help place the industry on a stronger, more inclusive growth path.

IRDAI’s EoM guidelines were meant to reduce costs, but expense ratios have gone up. Why?

The new EoM framework, while well-intentioned, has had unintended outcomes. Since it is product-agnostic, it ended up favouring larger insurers who increased commissions to grow market share. This led others to follow suit, resulting in an overall increase in industry expenses. Even public sector insurers have had to adapt to remain competitive.

To manage within EoM caps, many insurers increased their focus on group health, government schemes like crop insurance, and group term life—segments that often carry higher loss ratios. This means that while expenses have gone up, the loss ratio in some products is increasing too.
There’s growing recognition within the industry that the framework needs recalibration to meet its original goals—reducing customer costs and ensuring fair competition—without incentivizing unintended portfolio shifts.

Are insurers as well-capitalised as they claim? While FDI limits have risen to 100%, we’ve also seen several foreign exits. Are insurers truly financially strong or reluctant to cede control?

India’s solvency norms have proven effective—no insurer has failed, which is a testament to the strength of the framework. It’s important that these standards not be diluted. Alternate or short-term methods to boost solvency positions should be treated with caution.

At the same time, while FDI limits have been relaxed, some global insurers have exited. This is often due to differing governance expectations, limited management control, or strategic considerations. It’s important that capital strength is backed by sound underwriting, operational transparency, and strong governance for long-term resilience. Overall, we need promoters who are committed to the long term are required, getting short term-oriented Funds will not help.

LIC is reportedly planning to enter health insurance via a stake in ManipalCigna. If large insurers can expand through such acquisitions, what then is the rationale for composite licensing?

Without commenting on any specific transaction, I’d note that the challenges in health insurance are fundamentally structural, adding new channels or expanding distribution alone won’t address them.

Moreover, under current law, the Insurance Act places a 10 percent cap on investment in another. Any such expansion strategy would need to carefully consider the legal framework and regulatory implications.

Composite licensing is part of the draft insurance amendment. Companies should examine the operational complexity and capital framework (once finalised) to evaluate this option.

COVID-19 cases are rising again. Is the industry ready for another wave?

Pandemics and climate-related events are core to the risk landscape in insurance. Insurers must be prepared. During the Delta wave in 2021, many companies paused issuance of term life or COVID-specific health products. This highlighted the sector’s high dependence on reinsurance.

Building a more self-reliant, domestically anchored underwriting and pricing capability should be a long-term priority. In the short term, insurers would look to reinsurers for direction, a sad but telling state of our industry.