Source: TOI
Context:
The Insurance Regulatory and Development Authority of India (IRDAI) has been granted enhanced statutory powers to curb insurance mis-selling through provisions in the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025, recently cleared by Parliament.
Key Objective of the Amendments
- Strengthen policyholder protection
- Improve transparency in commission disclosure
- Reduce conflicts of interest in insurance distribution, especially bancassurance
- Tackle widespread mis-selling of insurance products
Major Regulatory Powers Granted to IRDAI
1. Commission Disclosure & Regulation
- Clause 36 amends Section 40 of the Insurance Act, 1938
- Empowers IRDAI to:
- Set limits on commissions/remuneration
- Prescribe how commissions are paid
- Mandate how commissions must be disclosed to policyholders
- Enables rules requiring insurers and intermediaries to explicitly disclose embedded commissions in insurance products
This marks a shift from opaque pricing to informed consumer choice.
2. Stronger Conflict-of-Interest Norms (Bancassurance Focus)
- Clause 25 substitutes Section 32A of the Insurance Act
- Statutory ban introduced:
- Directors or officers of insurers cannot hold similar positions in:
- Banking companies
- Investment companies
- Directors or officers of insurers cannot hold similar positions in:
- Significance:
- Banks are the largest corporate agents for insurance
- Prevents board-level influence that may push products of linked insurers
3. Tighter Control Over Intermediaries
- Applies to:
- Insurance brokers
- Web aggregators
- Corporate agents
- Section 42D (amended) empowers IRDAI to:
- Prescribe fit-and-proper criteria
- Set eligibility conditions
- Suspend or cancel registrations for regulatory violations
- New Section 40(2A):
- Gives IRDAI wide rule-making authority over agents and intermediaries
- Covers commissions, disclosures, and conflicts of interest
