Irdai mandates tagging salesperson on insurance policy to curb mis-selling

The Insurance Regulatory and Development Authority of India (Irdai) has made it mandatory to tag the authorised salesperson to every insurance proposal, policy and certificate, finalising a headline measure aimed at curbing mis-selling across the distribution chain.

The decision, taken at the regulator's 137th authority meeting in Hyderabad on 28 July, comes just two days after Irdai chairman Ajay Seth publicly made the case for it.

Speaking at the silver jubilee conclave of the Insurance Brokers Association of India on 26 July, Seth had said tackling mis-selling would require holding individual salespeople accountable, not just intermediaries, and that insurers should be able to trace every policy back to the point-of-sale person, agent or broker who sold it, Mint reported. He said such a database did not yet exist and would be addressed through a proposed Public Insurance Registry.

The intermediaries framework was also amended to introduce perpetual registration with an annual fee in place of periodic renewals, alongside enhanced disclosure and governance requirements extending to third-party administrators and surveyors.

Both changes stem from draft rules Irdai floated in June to implement the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025, which were open for comment through early July. The regulator cleared the second amendment to its actuarial, finance and investment regulations, liberalising investment norms and easing capital infusion, and the registration and amalgamation amendment streamlining share transfers and corporate restructuring.

In a key policyholder-centric move, Irdai operationalised the Policyholders' Education and Protection Fund, constituted under the SBSR Act, to promote insurance awareness, strengthen grievance redressal and help trace unclaimed insurance amounts. It also approved a codified penalties framework setting out a structured process for show-cause notices and reasoned orders.

Irdai granted registration to ProTec General Insurance Ltd, the fourth insurer cleared in 2026, and noted that two insurers, one life and one general, have raised foreign shareholding beyond the earlier 74% ceiling following the move to permit up to 100% foreign investment.

The new rule stops short of touching commission levels, which Irdai is addressing separately.

According to reports, the regulator is preparing a consultation paper on distribution reforms, expected around the end of July. Under the current framework, distributors can earn up to 40% of first-year premium on certain products, much of it paid upfront, reports noted. Seth has previously urged insurers to link incentives to the quality of sales rather than volumes, and to disincentivize unsuitable product sales and mis-selling.