Irdai's recent reforms will help expand the market

India’s resolve to emerge as a global economic powerhouse is anchored in the twin pillars of self-reliance and economic resilience. As macroeconomic conditions worldwide present newer risks and challenges, insurers and re-insurers assume a crucial role in insulating the economy from external shocks. The unique capacity of the insurance industry to engender resilience and self-sufficiency, by underwriting risks and spurring the capital markets provides the foundation for the nation’s progress.

Against this backdrop, the Insurance Regulatory and Development Authority of India’s (Irdai’s) visionary ‘Insurance for All by 2047’ mission plays a crucial role in realising the goal of building a financially robust and resilient nation.

Irdai’s road map for insurance reforms encompasses a range of strategic measures for enhancing the accessibility and affordability of insurance products, while also promoting the industry’s development. While the recent slew of reforms is set to give a boost to the industry, the following efforts are critical to achieving deeper insurance penetration in the country.

In order to achieve accessibility for all by 2047, insurers today are tasked with a greater responsibility to understand their customers’ needs through timely and unique solutions. Addressing the need for rapidity in today’s dynamic market, Irdai’s ‘use and file’ framework helps spawn innovative offerings, providing insurers with much-needed flexibility in designing innovative products and shorter timelines for introducing insurance plans in the market.

The latest amendments to the regulations on ‘payment of commission’ and ‘expenses of management’ by Irdai, aimed at freeing the industry from the restrictions of multi-layered expense limits, are expected to assist in expanding the insurance market. As the market grows, the impact of such reforms on insurance products would inevitably decrease, allowing insurers to offer more competitive pricing.

The recent reforms announced by Irdai will help bolster the ease of doing business and will aid in making the sector more investment-friendly. One of the significant reforms is the new limit for private equity funds and the capital structure. The reforms have allowed insurers to access more capital, which will enable them to attract more investment, strengthen their balance sheets and pursue growth opportunities.

Simplifying regulatory and compliance requirements is another important pillar in the road map to enable insurers to focus more on their core business, leading to better outcomes for customers and the industry as a whole.

The new regulations, which reduce the number of returns to be filed by insurers, is a huge relief for them. It will also facilitate the smooth functioning of the sector, which is crucial for the ease of doing business.

The regulator’s proactive stance in identifying a lead insurer for each state in India, through collaboration with state governments and insurance companies, is a revolutionary step towards enabling insurers to provide insurance accessibility to all. This approach ensures that insurers have a deeper understanding of the specific needs of each state and can design customised insurance solutions. The appointment of a lead insurer will foster healthy competition among insurance companies.

By leveraging technology and collaboration, Irdai’s efforts have not only encouraged incumbent players, but also contributed to the rise of InsurTech. With several regulatory developments that will further alter how insurers do business with customers, the future looks bright for the industry. In light of these reforms, insurers must be quick to respond to the evolving regulatory environment by offering innovative solutions and boosting their digital capabilities to reach customers — urban as well as rural.

The next big milestone is to enable a financially protected society, and the insurance industry will have to play a crucial role in making this a reality. 
 

The writer is the managing director and chief executive officer of Max Life Insurance