Ahead Of Union Budget 2026, Emkay Identifies 4 Red Flags In India's Insurance Sector

While there have been ‘desirable’ alterations undertaken in India's insurance sector like ‘Sabka Bima Sabki Suraksha (Amendment of Insurance Laws) Bill, 2025’, which permits 100% FDI in this vertical, brokerage house Emkay identified red flags linked to to high commission and operating costs are against the basic premise of the product.

Union Budget 2026: Red Flags In India's Insurance Sector

Credit Linked Life Insurance: The basic idea of a Credit Life Insurance product is to protect the borrower's dependents in case of the sudden demise of the borrower, and protects the lender from the loan turning NPA in case of the borrower's demise. This protection product bundled with the loan is to be promoted and sold by lenders for the benefits it offers to the lender, not for the exorbitant commissions.

Non-linked Savings products: By offering ~10x annualized premium as the Sum Assured, a typical non-linked savings product offers limited protection to the customer, who can afford to pay that premium, and has to be viewed as a savings product. The tax benefits available for such products have to be seen as the premium or excess returns that the customer expects for the illiquidity. Against this backdrop, the overall distribution and operating cost needs to reduce, in order to make these products an attractive alternative to other avenues of financial savings of fixed-income-nature products.

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Motor Third-Party Insurance: A mandatory product with standard tariffs does not justify its high commissions payout, especially in case of new vehicles. This product is more akin to mandatory products like a FasTAG; hence, a fixed facilitation fee is justifiable, but not the hefty commissions.

Retail Health Insurance: Bringing more people under the ambit of Health Insurance should be encouraged. Hence, there should be a limit to the higher commission for bringing a new person under Health insurance (not porting of policy). However, renewal commissions need to be brought down in order to keep the premiums affordable, as these premiums tend to rise owing to the increasing age and changes in pricing. Notably, effort by the distributor is also limited in case of retail health renewal.