At a time when the life insurance industry is faced with unprecedented challenges with regard to growth, profitability and sustainability, newly appointed Member (Life) at the Insurance Regulatory and Development Authority (Irda) Sudhin Roy Chowdhury has his task cut out. In his first media interaction since taking charge, he tells Niladri Bhattacharya it is not correct to attribute the slide in premium collection to regulatory reforms. Edited excerpts:
What are the key challenges you are faced with right now, as member (life) of Irda?
The key challenge would be to keep the industry focused on overall growth — new business as well as conservation. Increasing the share of health segment in the total pie would be the need of the hour. There is an expedient need to bounce back in the pension space, where there is immense potential. Distribution and persistency are key challenges for the sector, both of which need to be nurtured carefully to preserve the long-term prospects of the sector.
The recent slide in life insurance premium collection has been attributed to the new regulations that came into force in September 2010. Do you agree with this view?
It is not correct to attribute the slide to regulatory reforms, the emphasis of which has been enhanced disclosures, conservation of business, preserving the long-term nature of insurance contracts and, broadly, to secure a better deal for the policyholders. The unfavourable market conditions did pose some concerns, especially under the linked portfolio.
A turnover of agents has also been a major concern for companies. There are many positives that have occurred during the period. There has been a better mixture of traditional and linked products. The average ticket size and sum assured have shown a rise. Operating costs have reduced. Policies with longer tenures have shown increased sales. Alternative channels like internet sales have picked up along with sale of pure term products. The sector is focused on the growth path in the current year.
One of the main criticism on the product front is the time taken for product approval. Why is this delay? What are the steps Irda is taking to make this process faster?
When a product is filed with Irda, apart from looking at the features, terms and conditions, pricing, financial projections, the primary focus would be on the elements of policyholders interests such as disclosures, benefits, limitations, flexibility and options. When there is a concern in a product from this perspective, it could lead to slight delays owing to the correspondence being made with the company.
Insurance companies are often accused of mis-selling. What are the steps the regulator is taking to curb this practice?
The protection of policyholders’ interests is a prime focus of the Authority. To this end, a lot of reforms were initiated over the past two years. Improved disclosures, easy-to-understand literature, revision in pre-recruitment syllabus for agents apart from extensive awareness campaigns and introduction of integrated grievance management have enabled in controlling mis-selling issues.
This is an ongoing process subject to regular review and feedback. Regulatory actions in the form of penalties for deficiencies on this count are also initiated.
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Is the current regulatory environment effecting product innovation in the insurance space?
Growth in the last decade is attributable to several factors — increased distribution channels, extensive reach of insurer’s presence (office as well as personnel), improved customer services, robust technology, increasing competition and also product innovation. There has been no move to curb product innovation; rather the emphasis has been on proper disclosures, securing a fair deal to the customer and preserving the nature and feature of an insurance product
What is the main rational behind need-based selling and draft guideline?
We undertake regular review of issues relating to policyholders interests. As part of it, this initiative was introduced to not only ensure that the right product is sold to the customer, but also that the prospect takes adequate cover on his life to protect his family in the event of a contingency.