Insurance Bill 2025: What’s in it for policyholders?

This is in focus The Hindus current affairs podcast What is in this bill for for the large segment of informal low income households for the policy holder What we see is that they need help right at the hospital? Where the delay is happening and the treatment is getting delayed or rejection is happening and they have no answer Why the rejection is happening the grievance system is really slow? Who holds the TP accountable? Where is their accountability government themselves are proposing such products to the consumer that you bundle home Health and life together. Then I think it should have been allowed for the private players as well Hello and welcome to in focus. I'm G. Sampath the parliament has passed the subka be mass subkey Rakshah amendment of insurance laws bill 2025 It is being touted as a game changer especially with the move to allow 100% MDI in insurance companies The government also says that the act strengthens the insurance regulatory authority of India and the life insurance Cooperation of India, but what does this bill do for the ordinary citizen the buyers of insurance for a long time now We keep hearing stories of claims being rejected Misscelling of insurance and hidden exclusions. Does the bill hold any home on these counts? We decode this new legislation in this episode of Infocus and joining us is Shilpa Arora co-founder and chief operating officer of insurance Samadhan a platform that helps policyholders resolve insurance issues Including unfair treatment welcome to in focus. Shilpa. Thank you so much for joining us You are one of the co-founders of insurance a Samadhan and I was just reading about your company Can you just tell us for the benefit of our listeners? What exactly does in insurance Samadhan do and what was like what inspired you and your co-founders to sort of start this Platform so insurance Samadhan we started in 2018 With the purpose of helping the policy holder So Deepak me and Salish we were working in max life insurance and one day a crime branch my officer walked into the Company and his father was sold about 38 policies with 60 lakhs of premium 38 policies 38 policies multiple companies and 60 lakhs of premium and All the crime branch officer could do was to arrest this seller But the money was gone and his father suffered a heart attack as well We took about six months to help him get the money from all the companies back And that was a trigger point that if a person of that stature a crime branch officer cannot solve for himself Then how a common person build star you know solve for this misscelling and claim rejection and that's how we started in Charan Samadhan with the focus to help policy holder with you know misscelling of insurance claim rejection Delay in claim short settlement, which is very high in health insurance these days So we are helping in life health general insurance motor fire everything. So all insurance products Okay, great. I mean this is This is amazing. I think a lot of people listening to this would be interested to know where to go if there is an insurance Dispute necklace being rejected when I've been miscelled insurance and For the struggle to you know get the money back and all that so we'll come to those aspects in a bit But today we are here to talk about this bill sub carbima sub key raxia amendment of insurance laws bill So, you know the main selling point of this bill so far as the government is concerned has been raising the FDA limit or removing the FDA limits would speak to 100% of Of the insurance company, you know in 2015 the FDA limit was raised from 26% to 49% and then again in 2021 it was raised to 74% and we're in 2025. It's raised to 100% so what was the aim with all these previous Rases where those aims achieved and this latest race is it an Outcome of the failure of the earlier raises or is it because they were successful? You want to raise it to 100% like what is going on here? So if we look at the insurance history The Malhotra committee was established They proposed privatization of insurance. So in 2000 the privatization happened for insurance where foreign companies were were invited to India and in 1999 the IRDA Act was passed and IRDA as a regulator was established So at that point of time 26% was the foreign investment so all we wanted was You know expertise of insurance so at that time the clause was that the foreign partner should have 100 years of experience In into insurance and should be operating in multiple countries and the Indian partner would be a obviously a large partner because 100 CR amount capital is required So that's how the insurance privatization began in 2015 when 49% was raised and that time the distribution had increased The underwriting, you know processes were more or less in place But the penetration was still not as per the requirement. So the requirement though FD element was raised to 49% Again, India wanted to have control at their level not at the foreign level then in 2021 It was increased to 74% because obviously there was a COVID stress the financial market was under stress and capital was Required so it was raised to 74% but the Insurance market was maturing and the regulator was taking shape and understanding the market and now in 25 with 100 percent FDI So now the capital of course is required because India wants to do Insurance for all by 2047 so capital is required distribution system is required more innovative product is required So this is in aiming that part and also now the regulator is becoming stronger They have learnt in this journey of 25 years as to how to regulate and how to control So probably I'll say it's a more learning approach that India has followed To raise to 100% now. Okay, but it is much needed Because I've worked with various companies in Japan They found that you know getting an Indian partner of a stuff because they did not trust The Indian subsidy they they had issued they had certain experiences. What kind of issues some ran back see issue was there Where a Japanese company farmer company had to had suffered losses. So they were not very comfortable with Indian partners So now with 100 percent FDI I'm sure the Japanese market also would open up into India where Better products would be available So and also when you look at capital. So if a foreign partner is ready to get the capital that Proportion it Indian partner may not you know invest so that is also an issue so with 100 percent FDI More power and ownership goes to the foreign partner foreign company Right, you know, I agree with you completely when it is it's quite a positive Move in terms of attracting financial capital foreign capital into the insurance sector. But Is that enough to ensure that the buyer experience is also good and also you spoke about 100% coverage for insurance for all now in India. We have a large Segment of rural informal low-income households also so will will this 100% FDI Do anything to sort of ensure that they are the insurance policies are affordable they're accessible You know without any kind of pricing controls also coming into Play so what is in this bill for for the large segment of informal low-income households, you know So the government since it they are targeting foreign insurance for also they have to reach the rural market So capital inflow will obviously improve the distribution system and better products to the market As far as the premium and all is concerned premium yes because of the competition and the capital flow Also, I think the operation cost should in reduce because newer technology should come in more, you know underlighting should be more technically driven claim experience should be technically driven because if you look at those slight cancellation it is all live data which can be incorporated and claim can be paid, you know, you don't actually have to file So these things can be Technology driven with the capital inflow, but claim experience is more to do with the medical inflation as well It is more to do with you know how the hospitals are also behaving The fraud that is happening in the insurance sector so they are the regulator role will become very important So it has to be both regulator a very strong regulator to be in place along with the capital which can actually improve the rural Outreach so as to say so speak of the regulator in this case it is the insurance regulatory IRD. Yeah, yeah, yeah, so the government has said that the bill strengthens the regulator So does it really like how does it strengthen the regulators and will that strengthening of the regulator be enough To ensure that the customer's interest of protected the bias insurance interest of protects so if I look at The bill says the regulator can't cap the commissions of the Advisor so that is one thing which can reduce the misscelling part probably the other thing Is that the regulator can impose penalty up? It is a regulator can cap it doesn't mean the regulator will cap right they have the power to cap They have the power to cap right now. They don't right now. It was there, but now more strongly. They have said that Okay, there's a power to cap the commissions of the Like what is the what are the commissions right now like how much to they so it varies So brokers will have more but Insured as advisor depending on the category of what sales they are achieving so there are categories of platinum gold kind Situation where they may are earn up to 50 60 percent or also in the first year followed by the renewal commissions So it is 60 percent of the premium of the premium okay, even though higher brokers are also getting very high Commission depending on the sales so their incentives also involve therefore and trips involved so somewhere That control may go to the idea they can impose Restriction on that part other part was that they can impose penalty up from once year to 10CR in case they found that you know There is a wrongful profit that the insurer is earning But all these are like post situation, you know event has happened and now you put a penalty like Currently on care they have put a penalty of one CR But for the policy holder or what we see is that they need Help right at the hospital, you know where the delay is happening and the treatment is getting delayed or ejection is happening And they have no answer why the rejection has happening the grievance system is really slow. So these are the areas where we need More regulation, but this is not a part of business. No most of these insurance companies. They use this third party Entities for assessing for assessing claims Are they why do they fit into the regulatory framework are they addressed in How are they addressed at all with before this bill and this is there is nothing As far as claim rejection is concerned or delays concerned It's I will only say indirectly misscelling maybe because They can control the commission commission and they can put a penalty But that is post so regulator the lot of power has been given to regulator. They have been asked to do an SOP also Where they can play a role where they can enforce no certain thing. How do how does who holds the TP accountable? Where is their accountability If they're rejecting claims randomly because they I believe they have a target for rejecting x number of claims rate Which goes directly against the very purpose of A range of policy. So how do they how can they be held accountable for a TPS can only be held accountable by the insurer Insurer having held accountable by the regulator. Okay. It works like that Directly okay, we will come back to this claims rejection and insurance Misscelling aspect in a bit which there are customer facing issues But coming back to the bill, you know this whole business of foreign reinsurance, you know So the requirement of net owned funds for foreign reinsurance has been reduced from 5000 crores to 1000 crores So can you explain how this will help? Isn't it usually better if you have a bigger requirement in terms of stability and Security so this is a basically an entry barrier was there 5000 CR was very high So very less reinsurer that they are if you know, what does the reinsurer do? Why do you need them? Reinsurer so reinsurance is a process by which the insurer ensures himself. Okay, you know against higher risk Catastrophe like covid-like situation which had happened so the reinsurer role becomes very important And now with the geopolitical situation and the environmental condition these things are Going to play an important role so With more reinsurer in place the insurance company can you know, ensure themself in terms of you know health insurance Where the you know claim payout is really high and if any covid-like situation comes at least the claim is payable Or any catastrophe crop insurance all these require reinsurance. So doesn't the reinsurer require a re-reinsurer? So they're like large body like GIC the domestic reinsurer who has the maximum share So with them entering there will be in a long term there will be assurance of claim. Okay, if anything wrong goes There's assurance of claim. So basically this reduction of this net owned funds requirement is to lower the entry barrier Lower the entry barrier more reinsurance can come because Currently domination is that GIC We need more players here as well. Right. So when we speak of insurance sector reform one of the long standing demands has been with regard to Composite licensing, you know, so what is this composite licensing? I believe one person can say everything or whatever So yeah, what is it and how would it have helped if this bill had brought in companies this should have been a part of passing Maybe we are not still mature enough to pass the composite license So composite license allow the insurer to sell both life insurance and general insurance product The advantage of this was passed was that the operations cost would have reduced Instead of reduce the premiums we have to pay maybe yeah, they could there could be have bundling of products could be there. I could have bought a single product which has life, you know, health and general covering everything every aspect So maybe the commissions that I need to pay on a product may reduce so operationally The cost could have reduced and more entries to the This market would have increased but I think currently we are maybe not mature What do you mean by not mature? What are we lacking? We have a huge population which needs insurance We've got insurance companies They're increasing by the numbers. What more do we need to achieve maturity for composite? The government must You know think because if you look at bajaj bajaj life is a separate entity bajaj general is a separator and life is a separator and generally separate So rather than having a separate entity it could have been Is there a risk involved if you allow This bundling of different insurance is into one package which you offer a customer like is there a risk involved which is why I think there's a risk involved government then self-approposing such products to the consumer that you bundle Home, health, and life together then I think it should have been allowed for the private Players as well Okay, so you know let's come to the main thing From from our audience perspective our audience is I think mainly Buyers of insurance that has been as sellers so from the consumer point of view Shilpa there are like from my understanding there are four basic Issues everybody wants to know more about one of one is of course claim rejections A second is misscelling which we discuss briefly Thirdly is hidden exclusions you think you're bought all this and you're covered And then at the time of you know applying for the claim you're saying oh, no, no, this is not included that is not included And then finally the policy wording is very opaque you know it's like circular reasoning It's like your mind spins and you try to read an understand what has been written in this policy document So that's the bill move the needle on you know these four aspects is there something we can look for You know to get some kind of Forward momentum and understanding how to grapple with this indirectly as I said for misscelling maybe the Control of commissions can help But otherwise we don't see anything coming In this bill for rejections or you know policy wording which you said is very difficult to understand There are regulation in place like there is a customer information sheet which has to be very simplified version in the policy document But when we look at it currently it is still very complex and very difficult to comprehend for a common person So I think it's more about the implementation now whatever we The regulator as I said has matured and has put a lot of things in place But the implementation is grossly missing so implementation. What is the problem in implementation? Is it because they don't have enough personnel to enforce all these whatever regulations we have like or do we not have A framework of rules like is there any rule on? This should be the timeline for processing a claim, you know Or this should be this should be how you should give the reasons for rejecting or do other countries have Mechanism in these domains or is there also it's like this? No, no everywhere. There is a mechanism So there are oombudsmen India also have insurance oombudsmen IID has prescribed the guidelines So whether you have to approve the claim within 30 days And if an investigation is required then you have to write to the consumer as to You know the investigation is required and a period of six months is then granted So everything is laid down here Similar to the foreign countries in US UK everywhere It is well defined, but enforcement is not there So when I say oombudsmen in US UK the oombudsmen time is fixed they would here to the complete immediately In India the time is fixed for three months So you file a complaint and within three months the insurance oombudsmen should respond and give a hearing to you But in the current situation it is going up to one to two years also And it's a multiple follow up and the system I think is not Very transparent to the policy holder The oombudsmen are not there at certain locations. So they're not there for three three four four months So imagine a cancer patient who who needs treatment is waiting waiting waiting The oombudsmen would join and then you know probably things will change and he'll get the hearing and then probably the money After the hearing happens. So the deal is very high in India and There was a draft which said that they would change recently in the last month where they said that If some oombudsman location is stuck with more cases say for example Mumbai if you look at them in the mark the complaints are higher and the cases are stuck for over a year No hearing nothing is happening no movement at all. So there they have said that they would transfer the cases to some Other location where the load is less But if the market is growing the complaint size would also grow So we are currently not prepared to handle those complaint and You know solve it quickly So that that part is grossly missing in India. We are more focusing on selling If you look at the distribution system if you look at the call of the government it is more like insurance for all by 247 but what about the claims? What about the misscelling? What about the problem that people are facing? If you're not able to build the trust then selling will become difficult. Why is there so much misscelling? What is why should you Why is this need to miss sell? But if somebody if there is a demand for a product You you should be able to sell that product as that product why is this where is this need to sell product a as product becoming from? See the basic this Problem becomes at the point of selling are advisors in India the qualifying criteria is class 10 So and then the exam and then they're more dependent on their managers who would go and sell to their initial So That is the problem that advisor themself are not very well equipped with the knowledge It takes time for them to understand the market understand the product and sell rightly But we have also seen that the attrition of advisor is very high in India the companies are not able to retain the advisor beyond a year Two months three months they sell one or two products and then they leave the market Are leaving they leave that particular company or they leave the market it they leave the Business or only okay, so that it's not like the leaving company insurance company and good insurance company be no no, they they're not They're not happy with the work and then they leave So it's not taking as a very serious profession in India that you know very few advisors are there who are long You know five years four years and they are doing good, but the newer Advisors that they come they leave the system and that is one big challenge That while misscelling happens also the commissions are higher there are incentives there are foreign trips and world You have seen banking how misscelling is happening and Every time the finance ministry steps in and wants the bank that don't do misscelling But still they have targets and we have seen enough proof that they have targets and there is pressure in the bank to do misscelling to the people so There's a combination the lack of knowledge and The commission structures and the incentives and world great and in in insurance some other than I'm just curious you know which what kind of problems From policy holders do you get the most like what is the problem which is the most common in your experience? So our 70% is health claim Issues so health can bring rejected or health claim being if you if you need 100 to please you are getting only that to replace like so both both So rejection is also high and a short settlement is very high earlier about five years back when we if you look at that time the deduction was about 10 15% which was okay, you know the deductible part but now it has increased to 30% What is the global norm for short settlement or whatever? Always it how much is deducted globally globally the deduction Generally is covered. There's nothing like a deduction in India. There's a deductible If you have to buy a deductible rider so these deductibles are basically the bandages and the gloves and you know the sanitizers That the hospital is using so this deductible business is specific to India in other countries They don't have this so you suppose you're you're you're you're in short for 100 rupees You get 100 rupees you know it's not like you you in India can only expect 85 rupees you will never get 100 rupees Yeah, it's not the rider My deductible rider to actually cover that. Okay. It is available in India also but that product design is like that You buy a rider or you buy a deductible complete policy then you get Then the deduction would not happen. So if I buy a deductible This does not happen here What we are seeing even the corporate hospitals are have started doing a lot of billing because this These product deductible has a huge margin a sanitizer. They are charging you at MRP the gloves You know the sheets the diapers and everything they don't allow you to get it from outside Where it is cheaper and they bill you and that is becoming a major part So as I said that the regulator and the hospital regulator is also required here We don't have a hospital regulator, right? So that is also required because the claim experience Is important going forward and the medical inflation needs to be controlled somebody has to look into the hospitals By the billing is so high if we don't reduce the billing then the claim experience of the insurer will be high And that would lead to higher premium for all of us in the next year Right so basically this short settlement of claims and claims rejects not the main issue they constitute 70% of our business then We have general insurance where fire claims are there Then motor claims and then there is miss selling which is about 11% of our business miss selling of life insurance product And apart two to three percent death claims also in life insurance Let me get you know speaking of This claims reaction and short settlement shouldn't there be some kind of A publicly available registry or a dashboard Where people can compare different companies different products in terms of what percentage How good they are in in sort of delivering on on on on the insurance claims If the somebody is rejecting I don't know 95% of whatever percentage and you or somebody's paying let us say 90% Other somebody else is paying 75 we have like informal Publications doing this, but shouldn't there be like a transparent way wherein people can assess Verify compare and then pick that I think the regulator has to pick up because currently the data that is shared is the claim settlement ratio Which is 99, 98% for all insurers. How is it 99% for every person because they only even if they pay a small portion It is said said that we have paid Even if they pay 25,000 of lack it is said to be settled You know, so a deep diving by the regulator is required what percentage and then Show that percentage to the people that this is how the settlement is happening So that data Is it available anywhere? No, we can't get it So suppose there is an insurance company which has we have a claim settlement ratio of 99% And if that company has been paying for let's say for 100 rupees of premium only 30 rupees For every settlement. Let us say and you will have no idea that's the case. There's no way of finding that out No way of finding that but this is very bad for the bio. Yes Yes, because they are selling at claim settlement ratio only they talk about if you look at their brochures So they only talk about claim settlement ratio which is a misnormal for the policy holder Okay, so that's it means nothing Climbed settlement ratio. It's it's mean nothing because you will see 99, 99 Every insurer. Okay, okay great One last question She'll first of coming back to this bill Would it be a fair to say based on you know, what we've been discussing so far that this bill leans more towards You know capital attraction and ease of doing business ease of selling insurance Rather than structural reforms that could you know Truly transform consumer experience, you know with regard to claim fairness Affordability inclusivity and so on. I would say you're right that this bill is more for the capital attraction and ease of doing business So that we reach insurance for all which is the call back to government As far as the other part is concerned the claim transparency and everything For that the they have said the regulation regulator has been given a lot of strength We still have to look at the regulator as to what other things that they would implement To improve the customer experience. I'm also expecting that maybe the foreign insurer will bring in some customer experience better Clean servicing better But if you look at the US market all there also a lot of insurance problems are there. So we're not sure What is going to happen unless the regulator steps up and take policy hold of protection as an important You know parameter and lay down a lot of regulation is policy hold of prediction A parameter at all you're saying important parameter. It doesn't figure at all in the bill. It is there. So they have talked about consumer awareness and protection Which there will be a specific fund which I idea will set up for awareness and protection I hope this awareness is not own just for selling this awareness needs to be about claims as well So I'm only hoping that you know Things should improve. It's all about implementation. So I'll not say the regulator has not put things in place There is a regulatory there is a grievance mechanism, but this grievance mechanism needs to step up as I said the ombudsman What is a stuck with number of complaints? They're not able to solve quickly for the policy holder So that implementation if a regulator steps in and improves Then the trust will build and more penalties if they are seeing a trend like the care example if they're seeing a trend particular trend that are you know insurance is regulatory rejecting rejecting for a particular reason and the number of complaints They can obviously monitor there is beam up rosa which is an IRDA site where you register your complaint There's ombudsman body where the complaints are registered and the data is available to IRDA If they can go into the data and then penalize according to wrong rejections being coming then probably you know strict action would happen on the insurer otherwise it's just rejection and short settlement which is happening But I think the focus has to be on policy holder protection and I think proactively You know flagging all these violations and implement I think implementation is the key Yeah, that's all I have for you Shilpa in this episode of Infocus. Thank you so much once again for joining us pleasure talking to you same here. Thank you This episode was edited and produced by Sharma Da Venkata Subramanian If you liked it do subscribe to Infocus by the Hindu on Spotify Apple podcasts or wherever you get your podcasts from Thank you for listening