In a high-level meeting between the Ministry of Finance and the Insurance Regulatory and Development Authority of India (IRDAI), the government expressed serious concerns about the rising cost of health insurance and its impact on insurance penetration. According to officials familiar with the discussion, the Finance Ministry has asked IRDAI to tighten its regulatory oversight, particularly over claim settlement timelines and grievance redressal mechanisms.
Health insurance premiums have reportedly surged by up to 15% this year. This sharp increase is deterring policyholders from renewing their plans and has contributed to a drop in overall insurance coverage, a worrying sign in a country where most citizens still lack adequate financial protection in case of a medical emergency.
Insurance Penetration Drops Amid Complaints and Delays
Latest data indicates that India’s total insurance coverage dropped from 4.2% in FY22 to 4% in FY23. Life insurance penetration fell from 3.2% to 3%, while non-life insurance coverage remained stagnant at 1%. These figures signal stagnation in the sector despite greater awareness of health risks post-pandemic.
The ministry highlighted growing consumer dissatisfaction with claim rejections and delays in settlement, especially among stand-alone health insurers (SAHIs). Corporate governance concerns were also raised regarding some private players, where transparency and compliance remain under scrutiny. Officials emphasized the need for more robust regulatory action before the Insurance Amendment Bill is passed.
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Policy Changes Likely as Government Pushes for Reform
The upcoming Insurance Amendment Bill, which proposes 100% foreign direct investment (FDI) and the introduction of composite licenses, is expected to further liberalize the sector. However, the government believes that unresolved structural issues must be tackled first. These include premium affordability, fair claim processing, and better protection for policyholders.
Sources suggest that the Finance Ministry wants IRDAI to monitor the board-level decisions of insurance firms more closely and enforce compliance with existing regulations. The prolonged vacancy in the IRDAI chairman’s post, unfilled since March, has also been cited as a hurdle in ensuring strong oversight. Some in the government advocate appointing a seasoned bureaucrat to lead the regulator and restore market discipline.
As policyholders face the dual burden of high costs and unreliable service, the government’s message is clear: Insurance must become more affordable, transparent, and accountable—or risk losing public trust.