SEBI’s Tech Leap vs The IRDAI’s Sluggish Digital Drift
A year after mandating three-hour cashless claim settlement, the Insurance Regulatory and Development Authority of India (IRDAI) still struggles to make digital reform a reality. The contrast with SEBI’s embrace of technology for the development of India’s capital markets could not be starker.
The Global Benchmark: Across advanced jurisdictions, insurance regulators have made technology the backbone of modern supervision. The US National Association of Insurance Commissioners uses predictive analytics for fraud detection and real-time claim tracking. The EU’s Solvency II and upcoming AI Act blend innovation with consumer fairness. The UK’s Financial Conduct Authority Sandbox has turned the country into an insurtech testbed, while Singapore’s Monetary Authority deploys real-time supervisory tech and blockchain-enabled claim audits.
These regulators treat technology as an ally in enforcing market development goals, fairness and efficiency. India’s insurance regulator still treats it as an aspiration.
A Regulator Taking Baby Steps: The IRDAI often talks digital but walks bureaucratic. Its 2019 sandbox saw few projects reach the market. Initiatives like Bima Bharosa, cybersecurity guidelines, and the flagship Bima Sugam platform remain incomplete.
Bima Sugam, envisioned as a unified digital marketplace for policy issuance, claim settlement, and grievance handling, has yet to cross procedural hurdles. The issue is not ideas but urgency. Comfortable with opaque manual systems, insurers resist reforms that would increase accountability and the regulator often lets them.
The IRDAI’s lack of regulatory control over hospitals further slows digital integration in health insurance. Oversight is indirect and routed through insurers and TPAs, leaving gaps in accountability and data flow.
The Directive That Lost Steam: To its credit, the IRDAI made a bold move last year, mandating settlement of all cashless health claims within three hours of discharge approval. It could have drastically transformed customer experience.
Yet compliance remains patchy. Hospitals and patients still face long waits while insurers cite “pending documents” or “system lags”. With no real-time monitoring or penalties, the rule survives mostly on paper a symbol of intent without enforcement.
The Persistence of a Paper Mindset: While global regulators use AI for supervision and as a means for development of the market, the IRDAI still relies on manual filings and post-facto audits. There is no unified data architecture or live dashboard of claim performance.
Basic consumer tools automated claim status, AI-based fraud checks, and transparent grievance tracking are missing or fragmented. Policyholders still wade through forms and confusion.
India’s health insurers also lack transparency tools common in advanced markets the standardised “Explanation of Benefits (EOB)” statement at the time of claim settlement and the “Expression of Coverage (EOC)” statement at the time of hospital admission. Elsewhere, policyholders see what’s covered and why something was denied. Indian customers often get jargon-heavy documents, if at all. The result: opacity, mistrust, and inflated premiums.
The Human Cost of Delay: For families in medical emergencies, every extra hour at the billing desk adds stress and uncertainty. Cashless insurance was meant to spare them that ordeal. Instead, many pay upfront and chase reimbursement later.
A recent parliamentary committee also highlighted persistent problems: low insurance penetration, high out-of-pocket costs, poor claim settlement, and a weak regulatory infrastructure.
Denying timely cashless claims, withholding EOBs, and failing to provide EOCs before admission to the policyholder is like depriving a human being of air, water and food. Without strong data analytics, insurers can’t price risk accurately or design new products. Innovation stagnates, and customers see insurance as paperwork, not protection.
SEBI’s Remarkable Digital Playbook for market development and supervision: Though SEBI still has ground to cover on consistent and timely enforcement, its performance on the development and supervisory fronts stands in sharp contrast to the IRDAI’s.
Late 1990s: dematerialisation eliminated paper share certificates.
2000s onwards: online trading, depositories, and algorithmic platforms arrived.
Today: T+1 settlement, almost real-time surveillance at exchanges, and advanced analytics define the system.
Technology underpins SEBI’s market development architecture—online surveillance, investor protection tools, and transparency. Investors trade and settle seamlessly.
The payoff: lower costs, wider participation, and one of the world’s most trusted market infrastructures. SEBI’s willingness to disrupt legacy systems made India’s capital markets a global benchmark.
A Mindset Divide: The real difference between the two regulators is philosophical.
SEBI treats technology as a tool of transparency and empowerment—even when industry resists. The IRDAI treats it as a supplement, relying on persuasion instead of compulsion.
Where SEBI built depositories and mandated electronic trading, the IRDAI still depends on voluntary adoption. Its initiatives are scattered, standards inconsistent, and interoperability poor. Supervisory technology live monitoring of insurers barely exists.
The Price of Reluctance: This caution carries heavy costs low insurance penetration, delayed claims, inflated premiums, and eroded trust. Fraud thrives in opacity; honest customers pay the price. Innovation stalls, and insurtech potential goes untapped.
The three-hour rule, which could have showcased India’s digital potential, instead highlights the gap between the vision and the execution.
Time for a Digital Reckoning: If India wants its insurance sector to match its capital markets, the IRDAI must lead a decisive digital overhaul. That means:
Mandating interoperable systems across insurers
Building a real-time claim-settlement dashboard
Enforcing strict penalties for delay and strictly mandating EOB/EOC requirements
Adopting AI-based supervisory and fraud detection tools
Above all, it requires a cultural shift—from paperwork to data, from persuasion to performance.
India already has the technology and talent to make insurance seamless and transparent. What’s missing is regulatory resolve. Until that arrives, patients will keep waiting at hospital desks, discharge papers in hand, wondering why their “cashless” policy feels anything but.
The writer is a retired IRS officer and Ex-Chief of Surveillance at SEBI and an advisor to corporates, market participants and tech entrepreneurs.
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