Tighter Underwriting Rules Make Insurance Less Accessible for Indians: Nithin Kamath, Founder & CEO of Zerodha & Rainmatter

Insurance makes a major part of financial security, yet many Indians remain uninsured due to high premiums, policy complexities, and too many changes in regulations.
In case a person does not have life insurance, it could leave dependents financially vulnerable. While a lack of health coverage may lead to high medical expenses, leaving a dent in financial health.

As per various media reports, recent trends indicated that strict underwriting rules in India, led to a surge in policy rejections.
Nithin Kamath, Founder & CEO of Zerodha & Rainmatter, raised the issue of stringent insurance policies’ impact on life insurance accessibility in a social media post.
He said, “The first thing you should do when you are starting your personal finance journey is to ensure you have sufficient life and health insurance. If you have dependents, not having life insurance is a bad idea. (However) based on my interactions with folks, perhaps the biggest reason why they don’t have life insurance is because the policies are a nightmare to understand with all sorts of jargon and hidden clauses. Then there’s the fact that insurers keep changing things. For example, I didn’t know underwriting rules had become much tougher and rejections had gone up.”

In India, insurance underwriting involved a detailed evaluation of an applicant’s health, lifestyle, occupation, and financial status to determine risk before issuing a policy. Factors included age, medical history, smoking habits, and family medical background played a critical role in setting premium rates and coverage levels. The Insurance Regulatory and Development Authority of India (IRDAI) is supposed to monitor these processes.

Many applicants remained unaware of various updates that happened frequently until they faced rejection. Policyholder's health risks that they were earlier unaware of, may also create unexpected issues.
Usage of complicated terms in insurance policies is another challenge.

Policyholders could find terminology, jargon and hidden clauses discouraging when buying policies. Terms like "riders," "exclusions," and "waiting periods" made it hard for applicants to fully comprehend their coverage. Frequent policy changes further complicated matters. Additionally, with some insurers extending waiting periods for claims or reducing payouts for specific causes of death, such as lifestyle-related diseases.