India Tightens Insurance Laws, but Will Claims Be Settled Faster?

India has ushered in a new phase of insurance regulation with Parliament clearing the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025, at a time when policyholder trust in insurers remains fragile. While the reforms significantly strengthen regulatory oversight, the central question for consumers remains unchanged: will claims be settled faster and more fairly?

For most policyholders, insurance value is tested not at purchase but at the time of claim. Delays, repeated document requests, unclear exclusions and unexplained rejections have long eroded confidence. The newly enacted law aims to address systemic weaknesses — but largely through stronger regulation rather than direct consumer entitlements.

The amendments overhaul three core statutes — the Insurance Act, 1938, the LIC Act and the IRDAI Act — with the goal of modernising the sector, expanding coverage and improving governance. Instead of embedding detailed consumer rights into law, the framework significantly enhances the powers of the Insurance Regulatory and Development Authority of India, placing enforcement at the heart of reform.

Under the new regime, IRDAI can issue binding directions, regulate commissions and incentives, order disgorgement of wrongful gains, impose higher penalties linked to policyholder harm, and publicly disclose enforcement actions. Experts say this could improve insurer discipline over time, but it does not fundamentally change the consumer’s position when a claim is filed.

Crucially, the law does not mandate statutory timelines or penalties for delayed or rejected claims. While insurers must now maintain detailed digital records of policies and claims — including timelines and reasons for rejection — enforcement remains regulatory rather than automatic.

Industry specialists argue this was a deliberate choice. Claim processes differ widely across life, health and general insurance, and hard-coding timelines into law could limit flexibility. Instead, claim turnaround standards continue to be governed by IRDAI regulations, which can be updated more quickly than legislation.

Where the law may make a real difference is in enforcement. IRDAI now has clearer authority to penalise unfair practices, cap commissions in the interest of policyholders and demand accountability through cleaner data and electronic servicing. This could reduce disputes arising from missing records or opaque processes.

However, weaknesses remain. Grievance redressal continues to be a bottleneck, with insurance ombudsman offices facing backlogs and enforcement challenges. Without automatic consequences for delays, experts caution that insurers may continue to manage — rather than eliminate — friction in contested claims.

In the near term, consumers may see indirect benefits: more insurers entering the market, greater competition, improved products and better digital journeys. The creation of a Policyholders’ Education and Protection Fund could also help reduce mis-selling if implemented effectively.

What is unlikely to change quickly is the lived experience of complex claims, especially in health insurance, where paperwork, investigations and interpretation disputes persist.

Ultimately, the new law strengthens the referee more than it rewrites the rulebook. Whether it delivers better claim outcomes will depend less on new rules and more on how rigorously existing ones are enforced — a test that will be measured not in policy documents, but in the speed and clarity of the next claim settlement.