The year 2025 has been a landmark period for India's insurance sector, marked by a comprehensive rewrite of key regulations aimed at protecting policyholders and boosting trust. While the regulatory framework has been strengthened with the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025, the ultimate test for consumers remains unchanged: how smoothly and fairly their claims are settled.
Key Regulatory Changes and Enhanced Powers
The new insurance bill has formally empowered the Insurance Regulatory and Development Authority of India (IRDAI) to set limits on agent commissions, a move designed to curb mis-selling. It has also significantly bolstered the regulator's enforcement capabilities. Penalties for serious violations can now reach up to ₹10 crore, a tenfold increase from the previous ₹1 crore cap.
Furthermore, insurers now face severe consequences for delays. Failing to file claim details promptly, including the date of filing and reason for rejection, could attract penalties as high as ₹1 lakh per day. In cases of suspected fraud, IRDAI has been granted powers to conduct search and seizure operations on insurers, brokers, and associated entities.
These reforms come at a critical time. Insurance penetration in India dipped to 3.7% in the last fiscal year from 4% in 2023-24. "Building trust in formal financial protection is essential. Reforms like these create an environment for consumers to feel assured and enhance insurance adoption," says Amit Chhabra of Policybazaar.
A Three-Layer Grievance Redressal System
A major structural shift is the creation of a three-tier system for resolving policyholder complaints. The first layer is a new internal insurance ombudsman stationed within the insurance company itself, whose reasoned decisions are binding on the insurer.
The second layer remains the 18 regional insurance ombudsman offices, whose jurisdiction has been expanded to include insurance brokers and complaints exceeding the previous ₹50 lakh limit. The third and new layer is an appellate authority, which can be approached within 30 days of an ombudsman's decision.
"This will improve existing complaint management for fairer disposal of cases and give customers one more layer to appeal," notes Parag Raja, MD & CEO of Bharti AXA Life Insurance. However, some experts worry this could clog the system. "Too many appeals would clog the redressal process," cautions a former non-life insurance chief.
To tackle backlogs, there is a proposal to transfer cases between ombudsman offices and a push for digitisation. A comprehensive digital platform would allow policyholders to submit complaints, track status, and file appeals online.
The Unfinished Agenda: Claims, Clarity, and Consumer Awareness
Despite the progress, significant challenges persist. Experts point out that the real battleground for customer experience is claims assistance. "Claim assistance is lacking and that is where money needs to be invested," says Abhishek Bondia, co-founder of SecureNow. He believes sustained growth hinges on policy personalisation and stronger claims support, both requiring significant technology investment.
Ambiguities in regulations also create grey areas. For instance, the moratorium clause in health insurance allows insurers to invoke fraud exceptions, leading to claim rejections for non-disclosures even decades later. "There is a dire need to define fraud specifically," argues Mahavir Chopra, founder of Beshak.org.
Consumer awareness remains a hurdle. Data shows many complaints to the ombudsman are rejected because they are beyond the scope of rules or because the policyholder did not first approach the insurer. There is a call to allow agents or brokers to represent policyholders during hearings, as consumers often lack the necessary information.
Finally, the faster 'use and file' product approval mechanism has led to frequent mid-year changes in policy terms, confusing customers. "With continuous changes, it is challenging to have a handle on what the product really offers," Chopra adds, highlighting the need for a standardised, definitive policy document.
In conclusion, while the 2025 reforms have armed the regulator with sharper teeth and created a more robust grievance system, the journey towards seamless claims settlement and absolute consumer trust continues. The success of these measures will ultimately be judged not by the rules on paper, but by their execution at the critical moment of claim.
