The past couple of weeks have been rather painful for the insurance industry. The regulator, which has the dual responsibility of developing and regulating the sector, has clearly shifted its focus towards policyholder protection. But before moving to rein in distributor commissions, it laid out its rationale with numbers—and those numbers made a strong case for intervention.
In its draft proposal, Recalibrating the Economics of Insurance Distribution, the Insurance Regulatory and Development Authority of India (Irdai) published data highlighting the high cost of running an insurance business in India, a significant part of which comprises commissions and incentives paid to distributors. Among the insurers sampled by Irdai, commissions in the life insurance business grew nearly 126% between fiscal year 2023 (FY23) and FY25, while premiums increased by only about 27%. In non-life insurance, commissions rose 173%, compared with premium growth of 37%.
Irdai has accordingly proposed reintroducing commission caps, a move that has met stiff opposition from the industry. The common argument goes something like this: the regulator should focus on service standards, claims and complaints rather than micromanaging costs. This was also the rationale for removing product-level commission caps in 2023, when insurers were allowed to determine their commission structures within the overall limits and guidelines governing expenses of management.
That argument has merit, but it must also be considered alongside the growing number of consumer complaints reaching insurance ombudsmen—and the substantial proportion being decided in favour of policyholders. If the industry is truly putting consumers first, this proportion should be negligible, not nearly half. The evidence suggests that when insurers face cost pressures, policyholders can end up bearing the consequences through poor service and outcomes.
In this story, Aprajita Sharma and I examine Irdai's proposed commission framework and the measures it intends to use to rein in mis-selling. The draft is open for public comments until 25 October.
When health insurance is tested
Staying with insurance, this week Mint Money also published its annual health insurance ratings. Choosing health insurance involves more than deciding how much cover you need and what premium you are willing to pay. The real test comes when you make a claim. You need to understand whether the policy offers comprehensive coverage, whether its exclusions and restrictions can throw up nasty surprises, and how reliably the insurer handles claims and complaints.
Mint’s annual health insurance ratings, developed in collaboration with ILM Research, bring these critical parameters together. They evaluate product features and exclusions alongside insurers’ track records on claim settlements, rejections and complaint handling, doing the heavy lifting to help you make a more informed choice.
You can access the ratings here.
The hidden cost of a vacation home
And now, moving away from insurance but staying with high costs, is this story by Shipra Singh on vacation homes.
I would be lying if I said I had never dreamt of building a quiet getaway in the hills, somewhere I could retreat to and drown out the noise and hustle of the city. The math, however, has never worked for me. It’s not just the large upfront investment and the opportunity cost of locking up that money. The recurring expense—and the effort involved in maintaining a property remotely—has been an even bigger deterrent.
That is perhaps what many buyers discover the hard way. Maintenance, repairs, security, property management and long periods of vacancy can steadily drive up costs. For some, the effort to recover those costs can turn a vacation home into a full-fledged hospitality business, creating a different kind of pressure on their time. Add changing jobs, family circumstances and travel preferences, and the dream may not age as expected.
Read the story to understand the cost creep involved in funding a dream of quietude through real estate far away—and the questions you should ask before taking the plunge.
Real estate concentration risk
In this interesting story, Ananya Grover examines how Bengaluru’s technology boom, salary increases and liquidity from ESOPs (employee stock option plans) and RSUs (restricted stock units) encouraged many professionals to convert equity wealth into premium homes.
That playbook may have worked between 2021 and 2024, when property prices were rising rapidly and borrowing costs were low. But the equation is changing as price growth slows, technology incomes become less predictable and rental yields remain modest.
There is also a hidden concentration risk. If your salary, future stock compensation and career prospects are tied to Bengaluru’s technology ecosystem, buying an investment property in the same market may simply replace one form of concentration with another.
It is therefore worth spending some time understanding what is driving your decision to buy real estate—and the costs and risks that come with it.
SIFs: flexibility comes with risk
In the investment space, Jash Kriplani examines hybrid long-short Specialized Investment Funds (SIFs).
SIFs are a new category of investment offered by mutual fund companies that allows investors to gain exposure to long-short strategies that are not available in the mutual fund space. Hybrid SIFs, as the name suggests, combine equity and debt investments with the flexibility to take short positions—that is, positions that can make money when the price of a stock or market index falls.
This allows fund managers to potentially benefit from falling markets or limit downside risk. The category has quickly gained popularity among fund houses. However, strategies vary considerably across funds. Investors should understand the underlying asset mix and risks before investing, particularly because the different strategies can have very different risk profiles.
Money Guru S. Naren
In our Money Guru series this week, Jash Kriplani spoke to S. Naren, executive director and chief investment officer of ICICI Prudential Asset Management Company, against the backdrop (link) of high oil prices, rising US interest rates and geopolitical risks.
Naren is of the view that when markets are expensive and uncertain, investors should diversify across asset classes rather than chase what has recently performed well. For him, asset-allocation products and flexible investing are key to navigating the current environment.
Until next week! Send in your feedback at deepti.bhaskaran@livemint.com.