Insurance Regulatory and Development Authority (Irda) chairman J Hari Narayan today said that the declined risk pool which came into existence in April 2012 will not be dismantled. He added that though general insurance companies had asked for it to be dismantled, it should be allowed to run for the next two years to take stock of whether experience with declined pool was helpful.
Speaking to reporters on the side-lines of a conference by Insurance Brokers Association of India (IBAI), he said, “The main request of the non-life insurers was that declined pool and pricing mechanism be dismantled completely and it should be left to the open market. We have some concerns about it. This is because the last time when it was dismantled, hardly any sales of third party took place by private insurers. All of it was only made available by public general insurers, which is why pool mechanism was constituted.
New regulations
On the product design guidelines, which Hari Narayan termed as the ‘most ambitious project’ of Irda, he explained that the product design guidelines have been examined by the Insurance Advisory Committee. He informed that they now have to be seen and approved by the board of the authority, which meets on 9 January. Post this, it will be published in the gazette.
Apart from this, he added that bancassurance rules, revision in investment guidelines, micro-insurance and reinsurance guidelines would be passed before the end of his term.
On raising of LIC’s equity investment cap
Talking about the government’s decision to increase Life Insurance Corporation of India (LIC)’s equity investment cap in a company to 30 per cent, the Irda chief said that it is imprudent. “It is a matter of legal interpretation. LIC is bound by the Irda, as any other insurer. But there is some provision in the LIC act, under which the government says that they have power to issue a separate set of instructions only for LIC. So it’s a question of legal position where Irda and Ministry of Law have a different view,” he said.
However, he added that Irda is an autonomous institution and the LIC issue was purely a legal interpretation and has not questioned their autonomy as a regulator.
On Finance Ministry planning to appoint Member-Distribution at Irda
The Irda chief said that there was a provision to have a fifth member at Irda and they had suggested creating a position for a Member-Consumer protection. But, the government decided to go ahead with having a Member-Distribution. “It strikes me as very odd. This is because we already have Member-Life and Member Non-life at Irda looking after distribution. I don’t understand what this third member will be doing,” he said.
Irda was initially considering having the fifth member as Member-Pension. But, post the constitution of Pension Fund Regulatory and Development Authority (PFRDA), they had decided that there was little need for this member at Irda.
On file and use procedure
Hari Narayan said that they have given a list of 18 products which can be termed as ‘use and file’ products. Though insurers have criticised this as one leading to curbing innovation, he said, “Innovation is fine and encouraged but at some point innovation should not be confused with freedom to produce toxic products.”
On high management expenses among Indian insurance companies
The Irda head informed that the Insurance Act specified certain limits for management expenses. “We are taking various administrative steps to ensure that insurers stick to it. Even if they stick to limits, proportion of management expenses is much higher in India than Malaysia, England or Australia and such places,” he said.
