Insurance Regulatory and Development Authority (Irda) Chairman J Hari Narayan on Friday said the declined risk pool, formed in April 2012, wouldn’t be dismantled. He added though general insurance companies had sought the pool be done away with, to take a decision on whether the pool was helpful or not, it should be allowed to run for the next two years.
Speaking to reporters on the sidelines of an Insurance Brokers Association of India (IBAI) conference, he said, “The main request of non-life insurers was the declined pool and pricing mechanism be dismantled and it should be left to the open market. We have some concerns on this. This is because the last time it was dismantled, there were hardly any third-party sales by private insurers. All of it was only made available by public general insurers, which is why the pool mechanism was constituted.”
New regulations
Hari Narayan said product design guidelines, which he termed Irda’s “most ambitious project”, had been examined by the insurance advisory committee, adding these would now be taken up by the board of the authority, scheduled to meet on January 9. Once approved, these would be published in the gazette. He said bancassurance rules and revisions in investment guidelines, micro-insurance and reinsurance guidelines would be cleared before his term ended.
LIC’s equity investment cap
On the government’s decision to raise Life Insurance Corporation of India (LIC)’s equity investment cap in firms to 30 per cent, he said this was imprudent. “It is a matter of legal interpretation. LIC is bound by Irda, as any other insurer. But the government says there is some provision in the LIC Act under which it has the power to issue a separate set of instructions for LIC. So, it’s a question of legal position. Irda and the ministry of law have different views,” he said. But, he added Irda was an autonomous institution and the LIC issue was a purely legal interpretation; it did not question Irda’s autonomy as a regulator.
Member (distribution) at Irda
Narayan said there was a provision for a fifth member at Irda, adding the authority had suggested creating a position of member (consumer protection). However, the government decided to go ahead with a post of member (distribution). “It strikes me as very odd. This is because we already have member (life) and member (non-life) at Irda, who look after distribution. I don’t understand what this third member would do,” he said. Initially, Irda had considered member (pension) for the fifth post. But after the Pension Fund Regulatory and Development Authority was formed, it decided there was little need for such a post at Irda.
File-and-use procedure
He said Irda had given a list of 18 products that could be termed ‘use and file’ products. Insurers had alleged this would curb innovation. Hari Narayan, however, said, “Innovation is fine and encouraged. But at some point, innovation should not be confused with the freedom to produce toxic products.”
Management expenses
He said the Insurance Act specified limits for management expenses. “We are taking various administrative steps to ensure insurers stick to these. Even if they stick to limits, the proportion of management expenses in India is much higher than in Malaysia, England or Australia,” he said.