Underwriting losses the biggest issue for insurers: Chairman.
The Insurance Regulatory and Development Authority (Irda) would soon come out with draft guidelines to put in place a framework for mergers in the insurance sector. It was also planning to launch a software to monitor the complaints filed by customers against insurance firms, said Irda Chairman J Hari Narayan.
The regulator’s existing rules and regulations lack clarity for approving a merger or acquisition plea.
“We don’t have clear guidelines available for mergers in the segment and took some time to prepare a framework. Draft guidelines will be issued for comments shortly,” Narayan said on the sidelines of a conference organised by publication firm Economist Communications.
The move comes in the backdrop of a proposal by Reliance General Insurance in the beginning of this financial year to merge its business with Royal Sundaram Alliance.
Narayan said the authority had developed a software to analyse the complaints pending with insurance firms.
More From This Section
Considering that 80 million policies were sold every year and around 200,000 complaints were received, the rate was low. However, an initiative to bring them down further would help the industry reach out to more people, he said. The beta version of the software was currently being tested, he said.
Irda has also proposed digitisation of insurance documents to increase clarity and accuracy in filings and reduce the cost incurred on postage and stamps.
“The forms should be easily readable and understandable to customers. There should also be an emphasis on accuracy. This would reduce the cost and help companies penetrate the market deeper,” Narayan said.
The increasing underwriting losses of companies was the biggest issue that needed to be addressed in the general insurance industry, he said. “Unless it acted immediately to reduce the loss, it would not be able to sustain itself for more than three years. It was a major concern and we would take regulatory steps to curb the damage,” he said.
The bids for public insurance schemes like Arogya Shree in Andhra Pradesh and Kalaignar Scheme in Tamil Nadu raised doubts about the operating models of the bidder companies, he said. For instance, in Arogya Shree, for which the premium is paid by the government, the bid for the first year was Rs 80 per head per annum. In a later bid, it was lowered to Rs 75, which made the authority doubt the model, he said, adding that such activities could be insurance frauds.