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India Brokers Warn: Reforms Risk 1M Jobs, Old Scams?
4 Oct
Summary
- Proposed insurance reforms could jeopardize over a million livelihoods in India.
- Brokers fear reforms may revive unethical practices and tax evasion issues.
- IBAI urges impact assessment before finalizing new distribution regulations.
The Insurance Brokers Association of India (IBAI) has issued a stern warning regarding proposed distribution reforms by the Insurance Regulatory and Development Authority of India (Irdai). IBAI cautions that these changes could put approximately one million livelihoods at risk over the next five years and potentially revive unethical business practices previously addressed by 2023 regulations.
In a letter to the Prime Minister and Finance Minister, IBAI highlighted that the introduction of numerous commission caps and a reduction in insurers' expense limits could negatively impact employment, competition, and overall insurance penetration in India. The association stressed that insurance distribution currently supports over 8.3 million professionals, with brokers playing a significant role in employing many self-employed individuals in smaller towns.
IBAI further expressed concern that new commission sub-caps might lead insurers and distributors to seek alternative payment methods, potentially reintroducing tax compliance issues. The association cited a past instance where such practices led to ₹824 crore in bogus GST input tax credit claims. Public sector insurers might also lose market share if they cannot match off-book payments offered by competitors.
To mitigate these risks, IBAI recommended retaining the existing expense-of-management framework, with potential for tighter computation rules if necessary, and a gradual transition period. They also proposed a mechanism for premium refunds or reductions in cases of force-sold insurance with low claims ratios, drawing parallels with government schemes like PMFBY and Ayushman Bharat.
