India’s Insurance Sector In 2024: A Year Of Transformation, Yet Full Of Obstacles – News18

Last Updated:December 16, 2024, 14:33 IST

In 2024, several changes to insurance products have been implemented to benefit customers.

The insurance industry in India has experienced a significant transformation in 2024, with key regulatory reforms, new product innovations, and a continued drive toward increased accessibility and customer-centricity. These changes have laid the foundation for a more efficient, competitive, and inclusive insurance market, one that promises to benefit both customers and insurers in the years to come.

Pankaj Nawani, CEO of CarePal Secure and Rakesh Kumar, Co-founder of Square Insurance share key observations from the insurance sector in India.

According to Pankaj Nawani, 2024 has been a watershed year, driven by five key reforms that are set to reshape the industry:

1. Expenses of Management Regulations: Effective from April 1, 2024, the new guidelines by the Insurance Regulatory and Development Authority of India (IRDAI) on expenses of management, including commissions, have introduced clear boundaries. This reform allows insurers to determine their business sourcing strategies while ensuring that customer benefits remain a priority. While this may favor larger, established insurers initially, it could spur innovation among smaller players who focus on product and distribution creativity.
2. Health Insurance Overhaul: Several changes to health insurance products have been implemented to benefit customers. These include faster claims approval processes (within one hour), reduced moratorium periods for claims, and the transfer of responsibility for managing claims across multiple policies to insurers, relieving customers from administrative burdens. Although these changes may cause short-term disruptions in the industry, they are expected to drive sustained growth by enhancing customer trust and satisfaction.
3. GST Reductions on Insurance: The anticipated reduction of the Goods and Services Tax (GST) on health and term insurance policies is poised to make insurance more affordable for customers. This reduction, though not yet implemented, is expected to stimulate demand for insurance products, making them more attractive to consumers.
4. Lower Surrender Charges for Life Insurance: In a bid to protect customers from unfair financial penalties, the government has significantly reduced surrender charges on life insurance endowments. While this reform helps prevent the mis-selling of policies, it also ensures that customers are not burdened by excessive fees when they choose to exit early, fostering a fairer and more transparent market.
5. 100% Foreign Direct Investment (FDI) in Insurance: After nearly 25 years of gradual liberalization, the Indian government has allowed 100% FDI in insurance companies. This bold move is expected to attract foreign capital, bringing in innovation and expertise that can drive the growth of the sector. It is also seen as a crucial step towards achieving the government’s goal of “insurance for all by 2047.”

Challenges Remain For The Insurance Sector

However, despite these positive changes, challenges remain. Rakesh Kumar, Co-founder of Square Insurance, points out that around 20% of India’s rural population still lacks insurance coverage, especially in health and life insurance. Factors such as limited awareness, inadequate digital infrastructure, and a lack of trust in the system continue to pose significant barriers to expanding insurance coverage in rural areas.

Kumar advocates for a focus on accessibility and simplicity in 2025, emphasizing the need for insurance products to be easier to understand and claim. He calls for government policies to play a pivotal role in creating frameworks that facilitate the adoption and claims process, particularly in rural settings. Awareness campaigns, leveraging mobile technology, and community outreach will be crucial to educating the public on the importance of insurance.

As the insurance sector continues to evolve, it is clear that the reforms of 2024 have set the stage for significant growth, provided the challenges of accessibility and trust are addressed. The year ahead holds promise for a more inclusive, customer-friendly insurance market that could ultimately provide much-needed protection to millions more Indians.