Insurance agents flag high hospital bills, inflated motor repair costs for rising premiums

The Confederation of General Insurance Agents Associations of India (CGIAAI) has highlighted that soaring hospital bills and inflated motor repair costs, not insurance agent commissions, are the main reasons behind the increasing insurance claims and pressure on premiums. They have urged the government to tackle these root causes rather than targeting insurance distribution.

The CGIAAI, representing 1.6 million agents, has called for standardized hospital and auto repair tariffs. They warned that the Insurance Regulatory and Development Authority of India's (IRDAI) proposed reforms, including tighter expense-of-management (EOM) caps, may weaken consumer protection while threatening the livelihoods of agents who assist policyholders during medical and accident emergencies.

The primary driver of rising premiums, the association says, is the industry's high 84% to 87% claims ratio, caused by systemic price inflation. Hospitals are accused of charging insured patients more than those paying cash, while garages inflate repair estimates when claims are involved. The CGIAAI argues that these practices increase insurers' payouts and burden policyholders financially.

They demand that the government and IRDAI address these costs directly instead of treating distribution expenses as the main issue. The confederation stressed that general insurance is not a standard consumer product, emphasizing the importance of assistance during complex paperwork and claim settlements. Agents earn an average commission of 12% to 13%, bearing high operating costs, especially in rural areas.

They reject the argument that distribution costs alone explain rising premiums and warn that aggressive cost-cutting could deprive customers of crucial support. Proposed EOM caps could pressure public sector insurers and mid-sized companies, potentially leading to branch closures in rural areas and reduced consumer choices. The CGIAAI also flagged conflicts of interest if hospitals and garages sell insurance policies, which could lead to higher costs and claim disputes.

They called for restrictions on aggressive bancassurance and urged the Finance Ministry and IRDAI for consultations before finalizing proposed regulations.