Reforms of Insurance Sector in India [UPSC Current Affairs]

The reforms for the insurance sector were announced by the Insurance Regulatory and Development Authority of India (IRDAI) for bolstering the ease of doing business in the insurance sector. In this article, you can read all about the reforms for the insurance sector and important facts for the IAS exam.

Insurance Sector Reforms

• Insurtech businesses are already using microfinance organisations as a platform to sell small-scale insurance products in rural India, improving insurance penetration.
• Consultations between the finance ministry and India’s Insurance Regulatory Development Authority(IRDAI) have begun.
• The “use and file” method might be given some consideration as the government concentrates on making doing business easier.

Key developments of the insurance sector:

• LIC IPO: The Rs 21,000-crore initial public offering (IPO) of the government-owned behemoth Life Insurance Corporation of India (LIC) was the most talked-about market news for the better part of the year. LIC reserved up to 10 percent of its offer size for its policyholders.
• Life insurers’ focus on guaranteed return policies: Life insurance companies launched traditional endowment policies, promoted as an opportunity for policyholders to take advantage of higher interest rates raised by RBI.
• Higher health premiums, newer products: The health insurance premiums for individuals rose by 8-15 percent this year primarily due to a sharp rise in claims during 2020 and 2021.
• Newer motor insurance riders: The IRDAI allows insurers to offer ‘innovative’ motor insurance riders in the form of pay-as-you-use, pay-as-you-drive and motor floater policies.
• Use-and-file procedure for quicker product launches: Use-and-file norms allow insurance companies to launch new products without prior approval from the regulator. The steps taken by IRDAI are in alignment with its goal of infusing more flexibility and higher governance in the sector. This has helped the insurance industry to mature significantly and continue to focus on increasing penetration

Way Forward: Insurers and policyholders had to quickly adjust to the digital mode for purchasing policies, receiving medical evaluations, maintaining policies, and resolving claims during Covid-19-affected years. Policyholders can purchase goods directly from insurers or through distributors on the network through this regulator- and industry-supported online store.

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