New Insurance Proposals: What Policyholders Should Check Before Buying

The Insurance Regulatory and Development Authority of India (Irdai) has proposed changes to how insurance is sold and how distributors are paid. The proposals address a concern for customers: whether the policy recommended by a bank, agent or broker meets their needs, or earns the seller a higher payout.

The changes are still under consultation. They do not yet give policyholders new rights or assure them cheaper cover. But customers can already question an insurance add-on, compare policies and ask what a recommended plan will actually pay when they claim.

Can A Lender Make You Buy Its Insurance?

When taking a home or car loan, a borrower may be offered insurance alongside it. The cover could protect the financed asset or repay the outstanding loan if the borrower dies. Those are different needs, and a borrower should check which one the lender is asking them to insure.

Irdai has proposed stronger safeguards against compulsory bundling of insurance with loans. If a lender says a policy is necessary, ask for the requirement in writing. Check whether you must insure the house or vehicle, and whether you can choose the insurer yourself. A life policy offered with a loan should be assessed separately for its premium, exclusions, and benefit to your family.

Compare the total cost of the loan with and without the offered policy before signing. If the insurance premium is added to the loan, you may also pay interest on that amount. Keep copies of the quotation and loan terms so you can check what you agreed to.

Will Lower Commissions Mean Cheaper Policies?

Irdai has proposed limits on distributor commissions and tighter controls on insurers’ expenses. It is also considering recovering commission when a policy is found to have been mis-sold. These measures could reduce incentives to push unsuitable products, but their effect will depend on the final rules and how insurers apply them.

A lower commission does not automatically mean a lower premium. Claims, hospital and repair costs, reinsurance and the insurer’s other expenses also affect prices. Buying directly online may cost less in some cases, but check the actual quote rather than assuming that removing an intermediary produces a saving. An adviser’s help with choosing cover and handling claims may also have value.

Before paying, ask for the policy’s Customer Information Sheet and read it alongside the full terms. Check waiting periods, exclusions, limits on payouts, and what you must disclose in the application. Compare the same level of cover across policies; a cheaper premium may come with a higher deductible or a lower payout for certain claims.

The immediate step is straightforward: compare the cover and the price, question any insurance tied to a loan, and buy only after you understand what the policy covers.

FAQs

1. Do I have to buy the insurance offered with my loan?
Ask the lender what cover it requires and get the requirement in writing. Check whether you can choose the insurer, and compare the loan’s total cost with and without the offered policy.

2. Will limits on commissions reduce my premium?
Not necessarily. Irdai’s proposals are still under consultation, and claims and other costs also affect the price insurers charge.

3. What should I check before buying a recommended policy?
Read the Customer Information Sheet and full policy terms. Compare exclusions, waiting periods, deductibles, and payout limits for the same level of cover.