IRDAI To Insurers: Cut Acquisition Costs To Make Insurance More Affordable

The insurance industry must rein in customer acquisition costs and overall management expenses to improve profitability and make products more affordable, a senior IRDAI official said on Wednesday.

Addressing the “InsureInd” organised by CII here, Insurance Regulatory and Development Authority of India (IRDAI) member (Non-Life) Deepak Sood urged insurers to evaluate the value delivered across products, channels and business lines.

“The high cost of acquisition and high expenses of management (EoM) need immediate focus from all players. That is critical to improve profitability and deliver affordability and value to customers,” he said.

His comments assume significance as the Economic Survey for FY’26 flagged rising acquisition and administrative expenses as a structural constraint for the sector, noting that a high-cost distribution model has kept insurance penetration low despite steady premium growth.

Sood said the industry must prioritise solutions to make health insurance affordable for the “missing middle” households that are neither affluent nor covered under government-backed schemes such as Ayushman Bharat-Pradhan Mantri Jan Arogya Yojana.

Many in this segment struggle to secure adequate health cover, he noted.

The regulator, he said, has introduced multiple reforms to ease compliance and promote product innovation, including expanding the scope of the “Use and File” procedure that allows insurers to launch customer-centric products without prior approval but subject to regulatory norms.

Sood underscored that achieving universal and meaningful coverage in life, health and property insurance by 2047 would be the true measure of penetration.

“Affordability, accessibility and awareness must form the three pillars of growth,” he said, adding that the premium-to-GDP ratio would improve only if products are priced within reach of ordinary households.

He also cautioned against mis-selling, saying it has eroded trust and hurt both customers and insurers.

“Selling correctly is an imperative for every salesperson, distributor and insurance company,” he said.

Industry observers said a sharper focus on cost rationalisation, digital distribution and customer-centric product design will be key if insurers are to balance growth ambitions with sustainable margins in the coming years. 

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