IRDAI Calls on Insurance Industry to Slash Costs for Greater Affordability
In a significant address at the "InsureInd" conference organized by the Confederation of Indian Industry (CII) in Kolkata, Deepak Sood, Member (Non-Life) of the Insurance Regulatory and Development Authority of India (IRDAI), emphasized the urgent need for the insurance sector to reduce high customer acquisition costs and expenses of management (EoM). This strategic move aims to enhance profitability while making insurance products more accessible and affordable for consumers across India.
Focus on the "Missing Middle" for Health Insurance
Sood specifically highlighted the challenges faced by the "missing middle"—a critical customer segment that struggles to obtain adequate health insurance coverage. This group includes individuals who are not affluent enough to afford comprehensive private insurance yet do not qualify for government schemes such as Ayushman Bharat or the Pradhan Mantri Jan Arogya Yojana (PMJAY). By addressing cost inefficiencies, the sector can develop solutions to provide affordable health insurance to this underserved population, thereby bridging a significant gap in India's healthcare landscape.
Regulatory Reforms and Industry Innovations
The IRDAI has already implemented several regulatory changes to foster ease of doing business within the insurance industry. These include promoting product innovations and expanding the "use and file" procedure, which allows companies to launch customer-centric products swiftly without prior approval. Such measures are designed to encourage flexibility and responsiveness to market demands, ultimately supporting the goal of cost reduction and improved service delivery.
Economic Survey Insights on Insurance Sector Challenges
Recent findings from the Economic Survey for FY26, tabled in Parliament in January, underscore the pressing issue of escalating customer acquisition and administrative costs for insurance companies. These rising expenses contribute to a "low-penetration, high-cost" equilibrium, driven largely by an inefficient, high-cost distribution model. This dynamic constrains the sector's growth and limits its ability to reach broader segments of the population, reinforcing the need for the cost-cutting initiatives advocated by IRDAI.
By prioritizing the reduction of operational costs, the insurance sector can not only achieve higher profitability but also play a pivotal role in expanding coverage to vulnerable groups, ensuring that more Indians have access to essential health insurance protection at reasonable prices.
