'In emerging situations, Irda is bound to be reactive'

Q&A: C S RAO

, chairman of Insurance Regulatory and Development Authority of India (Irda), is much better than what it is in many developed countries.

"While the first premium income in the life insurance sector has grown at a rate of 35 per cent over the last year, in the case of general insurance it has been 13 per cent," Rao says.

In a tête-à-tête with Business Standard, C S Rao gives his views on the reasons for this growth besides defending the authority on issues like delay in product approval.

What have been the drivers of growth in the Indian insurance industry?

In the case of the life insurance sector it has been unit-linked insurance plans (ULIPs) and in the case of general it has been motor insurance.

But the Irda is planning to come out with guidelines for ULIPs. Will the new guidelines scuttle the growth of the life insurance industry that has of late been driven by ULIPs?

We are seriously considering new guidelines for ULIPs. But we would not like to hamper the growth of the industry. We would just like better disclosures as the risk is ultimately being transferred to the insured.

How would you respond to a recent comment made by an insurance player that Irda is reactive and not proactive in nature?

I do not know what the player concerned meant when it complained that Irda is reactive and not proactive. In emerging situations, the regulatory authority is bound to be reactive and there is no alternative to that.

There have also been complaints that product approval takes a very long time in India as compared to many other countries. Your views on that.

We take time to give product approvals because we have to be careful about the product that is reaching the market. There are cases wherein the sales literature given is different from the product details that the actuarial department gives us.

So when there are some variations, we send our suggestions to the insurance company based on which it improvises. But, if the insurance company files an integrated report on the product, we will not take time to approve it.

Besides, we have also noticed that products are becoming complicated in nature. So we need to ensure that the products coming out in the market are simple and easy to understand for the consumers.

A significant percentage of agents working in the insurance sector today are considered to be non-active. Meaning, although they are on the rolls of the company, they do not add anything to the business. Is there a need for better regulations to ensure that the industry has a growing number of active agents?

I agree that there is a short supply of 100 per cent professional agents. That's because many of them are part-time agents and undertake this job only for additional income.

However, the onus lies on the insurance companies to ensure that all their agents are active in nature.

Besides, one also needs to understand that selling even one or two policies a month is a difficult task.