We're hoping growth in insurance will pick up by Q2-end: Irdai Chairman

In an email Q&A, Subhash Chandra Khuntia speaks about the positive response to Corona Kavach policy, standardisation of covid treatment rates and need for a retrenchment cover

The covid-19 pandemic has brought about major changes in the Indian insurance space. The society at large has woken up to the need of insurance protection against the uncertainties arising out of the pandemic. Insurers are resorting to standard products, adopting more digital ways to sell their products amid the pandemic, which may very well turn out to be an inflexion point as far as bridging the protection gap is concerned. In an email interview with Subrata Panda, the Insurance Regulatory and Development Authority of India (Irdai) Chairman, Subhash Chandra Khuntia, spoke about the positive response to Corona Kavach policy, standardisation of covid treatment rates, need for a retrenchment cover, and how the regulator is nudging more and more insurers to go for listing.  

Why did the regulator feel the need to bring out a standard covid product, given that the comprehensive health policies cover the hospitalization costs for corona treatment?

Though comprehensive health policies cover covid-19, the number of lives covered by individual or group policies is only about 470 million. If government schemes are not included, this number comes down to only 115 million. Thus, a sizeable population does not have health insurance policies. For them, a covid-specific policy will be very useful as this is available for the short term (3.5, 6.5 and 9.5 months) and will be much cheaper than a one-year comprehensive policy. Secondly, there is a possibility of the sum assured in comprehensive policy getting exhausted as covid-19 is a new and additional disease. Therefore, those having comprehensive policies may opt for covid-19 policy for additional protection. This is more so for family floaters, where possibility of more than one member of the family getting infected by Covid-19 is high as compared to low probability in case of other diseases. 

A working group was formed to give recommendations on forming a pandemic pool. How feasible it is to come out with such a product? Also, is government support needed for such a product?

Since there have been earlier instances of SARS and MERS and now Covid-19, it is felt that we need to be prepared for such eventualities in future. Irdai has set up a working group to examine various aspects including feasibility, extent of coverage needed and nature of risks involved. Depending on the capacity of a possible pool that would gradually increase over time, the need for and extent of government support will have to be worked out.

The government had asked Irdai and General insurance Council to look at developing a retrenchment cover. What is the status on that?

Irdai has been engaging with the industry to develop appropriate products to cover job loss or income loss. Such products are already available for limited periods for job loss on account of sickness or accident. To develop this idea further, a working group that was set up to develop a combi micro insurance product would also be examining ways to cover job-loss.

Irdai has asked insurers to take steps against hospitals if they deny cashless claims of policyholders. But insurers are saying in the absence of a regulator for hospitals, negotiations with hospitals on cashless claims and standard covid rate for treatment is getting difficult. What is the solution to this?

Cashless treatment is a facility available to policyholders in the network hospitals with which insurers have service level agreements. We have been encouraging the insurers to expand this list so that increasing number of hospitals come to the network and provide cashless treatment. A health regulator would certainly help in maintaining quality and affordability of health care services. Hospitals need to disclose the details of facilities and expertise available with them so that the customer can make a well-considered choice of hospital. It is also important for them to have standard protocols for treatment, and to charge fairly and similarly to all paying patients irrespective of whether payment is from out of pocket or through insurance. That is the reason behind insurers having pre-negotiated rates with hospitals for various types of treatment.

Insurers have been asking for standardization in covid treatment rates because insurers end up paying huge claims. Is the regulator talking to the government for standardising rates for covid treatment in the country?

As Covid-19 is a new disease, there was some initial confusion on the line of treatment and cost, but over time, the matter is settling down. In this time of distress, health providers need to come forward to provide quality care to Covid-19 patients at reasonable cost and not to think of making excessive profit. On the basis of suggestions of the Ministry of Health and Family Welfare, Government of India several state governments have fixed rates for treatment of Covid-19 in private hospitals. It is important for the hospitals to follow those rates in all cases including insurance cases. The General Insurance Council, which has all general and health insurers as members, is also engaged with the healthcare industry to standardize rates of treatment in the interest of the policyholders.

Both the life insurance sector and the non-life insurance sector have seen drop in business. When do you see growth returning in the insurance sector?

There was drop in business in the second half of March 2020 due to lock-down which affected face-to-face contact and disrupted the normal functioning of the insurers and their distribution channels. The trend continued in April, but in the meanwhile, insurers adapted themselves to remote working. Irdai has asked all insurers to prepare business continuity plans and rework their strategies. The result has been favourable. There is steady improvement on a month-to-month basis, with rate of de-growth of life premium reducing to 2.2 per cent till July. There is already positive growth in the non-life sector till July at 1.6 per cent. What is very heartening is that during the month of July, 2020, the growth rates of life and non-life segments have been excellent at 18.9 per cent and 18.4 per cent as compared to the same month of the previous year. We are hopeful that the growth rates would pick up significantly by the end of the second quarter. The stimulus package announced by GoI for improvement of growth rate of the economy should further hasten the process.

Has the Irdai received any communication from the RBI regarding a capping on how much stake a promoter bank can hold in an insurance company?

We have not received any such communication from RBI. However, there is merit in banks being promoters of insurance companies for long-term sustainable growth of the financial sector.

Is Irdai going to bring in a regulation which will mandate insurers to get listed after a few years of starting operations?

Irdai had issued a discussion paper in 2016 proposing mandatory public listing of insurance companies that have completed eight years of operation in case of general insurers and ten years in case of life insurers. However, that was not pursued after analysing feedback from various stakeholders. At the same time, Irdai, as a regulator, will certainly have greater comfort with listed insurers in terms of accountability, transparency, higher level of corporate governance and widely held ownership. Therefore, we are nudging the insurers to go for listing. The already listed private insurers have got excellent valuation that reflects the confidence of the market in them. Some more insurers were planning to list, but the current market volatility, economic slow-down and pandemic have come as a dampener. As soon as there is improvement, I expect more insurers to go for listing and IRDAI will be eager to facilitate the process.

Do you think insurers need to shore up their capital base to deal with the uncertainties arising out of the covid situation? 

In order to conserve the capital of the insurers, the authority advised the insurance companies to take a conscious call as regards declaration of dividend for the year 2019-20, to control expenses of management within a prudent level, and ensure capital availability and solvency margin by devising appropriate strategies.

Recently, Irdai relaxed the capping on maximum sum insured for Arogya Sanjeevani policy. Since no upper limit has been set, what is the extent to which insurers can go in terms of sum insured? What has been the feedback on the product and how has the product fared in the market?

Response has been encouraging. We received feedback that several customers were seeking higher sum assured limit and this request of insurers was accepted and upper limit was relaxed. This standard product will enable the prospective customers to take a quick decision on buying health insurance. It is also expected to reduce or eliminate dispute at the claim settlement stage. It can be issued as a group policy and will be useful for employers to provide health insurance to their employees and workers. As on 31st July, 2020, 22 general and health insurers are marketing this product and have so far issued 62, 612 policies covering 91,233 lives.

Has the Irdai given a go ahead to the merged public sector banks to hold more than 10 per cent in two insurance companies? If so, why?

The situation arose due to the merger of certain public sector banks as a consequence of Government decision resulting in amalgamated banks becoming promoters of two insurance companies of same type. While IRDAI has given a time period of one year to resolve the possible conflict of interest issues, it has also allowed one bank to become promoter of more than one insurance company of the same type provided it retains active management control only with one of those and acting as an ordinary investor in the other. This will be a win-win situation for both the banks and the insurers. Whereas the bank can benefit from the ever increasing valuation of the insurance company and also as a distributor, the insurance company will be better off with a public sector bank being a promoter.