Insurance faces a premium challenge

Lokanathans and V.K.R.V Raos managed to survive floating applied economic research councils or institutes of economic growth, sometimes agreeing, sometimes disagreeing with the establishment. Slowly but firmly, the voice of free enterprise came to be heard in the corridors of power, thanks to A.D Shroff and company and the people of the calibre of Palkhiwala, Minoo Masani and C Rajagopalachari.

When the gurus of the Emergency became penitent and got relegated, the guards of reform in the guise of Manmohan Singhs found it easy to talk sense into the rulers and thereafter with a bit of luck, the pro-reform lobby never had to look back.

This, then, is the background of economic reforms in India and not just the scenario for the insurance industry alone. So I would commend the attempt of the co-authors of this book to highlight the challenges in the way of new insurance programmes that began in 1999 with the passing of the IRDA Act.

Palande, Shah and Lunawat were all executives turned teachers, now turned writers and their academic proximity at the National Insurance Academy at one time must have inspired them to co-author this book.

On the whole, the book seems well planned if a bit disjointed, possibly because the three writers come from dissimilar academic disciplines and it would be too much to expect that a fusion of styles would inevitably follow fusion of ideas.

However, this should be dismissed as a minor blemish because the authors have taken pains to discuss the various links in the chain of arguments and counter-arguments that are inevitable in a large democracy such as India.

Here are some examples of some interesting comments that particularly impressed this reviewer:

"The nationalised industry has to take the threat of losing further business earlier than expected more seriously" (page 16).

"Coverage by general insurance companies is still lower in India, compared with other countries. In fact, general insurance products were never aggressively marketed and although there are many useful schemes that could benefit the common man, he is not even aware of them (page 48)."

"It is known that their (LIC's and GIC's) under-performance arose from the fact that they were required to follow the objectives set out for them by the government and they performed in the manner they were expected to perform" (page 71).

The authors' approach is non-traditional. There are no pompous statistical projections since regression analysis is unlikely to yield accurate statistics in the absence of a comprehensive and flawless database of premiums and claims.

Higher education in insurance continues to be the Cinderella of the industry, and perhaps that is why it is not adequately covered in the book.

The authors have also failed to treat life and non-life insurance business separately since in all matters "" including, underwriting, claims, marketing and surely investment as well ""these two classes are entirely different in their thrust, treatment and impact. Besides, pension planning deserved a distinct treatment in a book of this nature, covering historical watersheds.

I would recommend this book as a reference volume for all university libraries in India and abroad but would urge the publishers to eliminate the few grammatical errors that have crept in.

Data must be presented in standard formats with due credit to sources so that researchers do not discount the usefulness of information furnished.

The authors admit to have come by scanty information on many issues and even found some sources of information unreliable and finally found even the experts themselves disagreeing on both the problems and solutions.

This shows the handicaps faced by most authors of technical literature in the East. Reforms in this part of the world can have real meaning only when the statistics that will truly reflect the benefits flowing from them are verified.

(The reviewer is an independent researcher and consultant in insurance and risk management)

INSURANCE IN INDIA:

Changing Policies and Emerging Opportunities 2003

P S Palande, R S Shah and M L Lunawat

Response Books

Pages: 492

Price: Rs 395