Insurance Reforms in India: A New Era Begins

India's insurance sector has seen a wave of reforms aimed at enhancing consumer trust and boosting market penetration. Several consumer-centric changes have been implemented, including the introduction of a fraud-prevention repository and faster claims processing through artificial intelligence and machine learning technologies. With the recent passage of the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025, the Insurance Regulatory and Development Authority of India (Irdai) has gained significant powers to regulate commissions and enforce penalties for violations.

Under the new bill, Irdai can impose penalties up to ₹10 crore for serious violations, a substantial increase from the previous cap of ₹1 crore. Additionally, delays in claim filings can now incur daily penalties of ₹1 lakh. This shift aims to ensure better compliance among insurers, brokers, and other stakeholders, thereby fostering a more transparent environment. The bill also acknowledges the importance of e-policy servicing, which is expected to enhance the customer experience.

Despite these advancements, insurance penetration in India remains low, dropping to 3.7% in the last fiscal year. Amit Chhabra, CBO of Policybazaar, emphasizes that building trust in formal financial protection is crucial for increasing adoption rates. The reforms, along with a reduction in Goods and Services Tax (GST), are anticipated to invigorate the market. Lower GST rates have already contributed to a 30% rise in first-time policyholders in 2025-26, indicating a positive trend.

However, challenges remain. Abhishek Bondia from SecureNow points out that sustained growth will depend on personalized policies and robust claims assistance, both of which require significant investment in technology. The need for improved claims handling is critical, as this is often the ultimate test of any insurance product.

Regulatory changes have also made it illegal for insurers to deny new policies based on age and have reduced the waiting period for pre-existing diseases to 36 months. Furthermore, the insurance ombudsman now has an enhanced role, with a three-tier grievance redressal structure designed to address consumer complaints more effectively. The internal ombudsman will hear complaints directly within insurance companies, providing an additional layer of accountability.

While these reforms are promising, concerns about the capacity of the ombudsman to handle increased complaints remain. The introduction of an appellate authority has raised questions about potential delays in the grievance redressal process. Experts argue that clearer guidelines and timelines for complaint resolution are essential to ensure a fair and efficient system.

In conclusion, the recent reforms in India's insurance sector hold the potential to rebuild consumer trust and increase market penetration. However, the success of these initiatives will heavily rely on the implementation of technology-driven solutions and a commitment to improving customer support. As the landscape evolves, it is crucial for all stakeholders to work together to create a more reliable and accessible insurance environment for the nation.