IRDAI seeks feedback on credit data use for insurance risk scores

The Insurance Regulatory and Development Authority of India (IRDAI) has invited public comments on a discussion paper that would allow insurers to leverage credit data when calculating risk scores and premiums. The regulator has set a 30 September deadline for stakeholders to submit their views on the proposal.

The move represents an effort to establish standardized risk assessment practices across India's insurance industry. Proponents argue that integrating credit information into underwriting decisions would enable more accurate premium calculations and help reduce information asymmetry between insurers and consumers. Such data could provide additional insights into policyholder behavior and financial reliability.

However, the proposal has drawn scrutiny from consumer advocates and data privacy specialists who question whether credit metrics are appropriate proxies for insurance risk across all product categories. Critics contend that using credit scores could disadvantage lower-income segments or those with limited credit histories, potentially limiting insurance access for vulnerable populations. Concerns have also been raised about data security, consent frameworks, and the adequacy of existing regulations governing credit information usage.

Industry observers note that while modernizing India's insurance infrastructure through a formalized registry represents progress, the specific mechanisms for incorporating credit data warrant careful evaluation. The IRDAI's consultation process will likely shape how insurers balance risk management objectives with consumer protection principles in the coming regulatory framework.