Govt Forms Four Panels To Set Insurance Industry Norms | Royal Sundaram
Remya Nair & Sneha Shah, 29 January, 2012
Govt Forms Four Panels To Set Insurance Industry Norms
Place : Mumbai
The finance ministry has formed four committees to take stock of insurance business in the country with representation from insurance companies, industry bodies, rating agencies and finance ministry officials. The panels that will prepare a 'roadmap' for the insurance industry in India do not have any representation from India's insurance regulator, three people involved in the process said.
In a first of its kind meeting last week with insurance companies and industry bodies, the ministry also asked their feedback on Insurance and Regulatory Development of India, or Irda.
The consultations process is part of the finance ministry's plan to set up advisory groups across segments to discuss issues impacting the sector and finding solutions for these problems. These committees have been formed under these advisory groups to undertake industry-wide consultation.
"It is a consultative exercise. We want to know what are the issues plaguing the insurance industry and the kind of roadmap that can be envisaged for the sector," said a finance ministry official, who did not want to be identified. "We want the industry's view on how to increase penetration, and steps that can be undertaken in the short- and long-term."
The four committees formed will look into issues related to the growth of the industry, development of products, issues with the regulator and other bodies, one of the people who attended the meet said.
The committees will also discuss ways to improve the insurance penetration in the country.
According to a senior Irda official, the regulator was not informed of any such meet by the ministry and the consultation has been undertaken without keeping Irda in the loop. Irda chairman J. Hari Narayan said, "The post of member life is vacant and hence there was no representation."
In the past, the finance ministry and Irda have been at loggerheads after the former directed General Insurance Corp. of India not to pay ceding commissions to general insurance
firms for the business they mandatorily reinsure with GIC Re. Irda had to step in to force GIC Re to honour the contracts with the insurance companies.
"The industry is facing a lot of challenges. There is a need to rationalize the regulatory part and focus on development issues," said P. Nandagopal, chief executive of IndiaFirst Life Insurance Co. "There are a lot of under penetrated segments-micro insurance, health and pension. A roadmap needs to be put in place to improve the reach of the insurance industry."
The life insurance industry has been disgruntled over the rapid pace of regulatory changes announced by Irda which saw the growth in their new business premium collections dip to 15% in 2010-11 from 25% in the year ago period.
Growth in new business further slowed this year with premium growth falling 17% to Rs. 71,954 crore in the April-December period, data from Irda shows. The industry expects to post negative to flat growth in this fiscal.
After bringing sweeping changes in unit-linked insurance plans, Irda recently announced comprehensive changes in pension plans-both on the traditional as well as the unit-linked platform. Though the industry agrees that most of the regulatory changes are customer-friendly, they are of the opinion that the regulator did not give them enough time to implement and adjust to these new regulations.
"Irda brought out pension guidelines in November forcing all companies to re-file all their existing pension products by January. Because of this, the pension market has become non-existent for insurance companies," said a chief executive with a life insurance company, who did not want to be identified.