 "Business Standard Insurance Round Table")
Though the insurance sector's six-year wait for the passage of the insurance Bill is finally over, the celebrations will be muted, for some time at least. That was the general consensus at the Business Standard Insurance Round Table here on Monday.
At the event, some of the leading voices from the sector came together, the first time after the passage of the Bill. Chief executive officers (CEOs) said the real impact of the legislation would be felt only when the Insurance Regulatory and Development Authority of India (Irdai) brought about enabling regulations that would provide more clarity in this regard.
The power-packed panel that discussed the new Act and its implications comprised Amitabh Chaudhry, managing director (MD) & CEO, HDFC Life; Arijit Basu, MD & CEO of SBI Life; Antony Jacob, CEO, Apollo Munich Health Insurance; Tapan Singhel, MD & CEO, Bajaj Allianz General Insurance; G Srinivasan, chairman and MD, New India Assurance; Sanjay Kedia, CEO, Marsh India; and P H Kutumbe, executive director (investment), LIC.
"Industry will continue to struggle for some time. Given the requirements in the law, it will take some time for investments to come in. Stake increases, price and changes in shareholder agreements before approaching the FIPB (Foreign Investment Promotion Board) would mean it would be at least three to six months away, if not more," said Chaudhry.
One of the concerns was the stipulation that management control would remain with Indians, apart from a fair valuation provision.
Kedia of Marsh India said while the passage of the Bill was positive, several issues were pending. "We need to see if 49 per cent is enough. Foreign banks have been operating at 100 per cent for so long. Pharmaceuticals is at 100 per cent; telecom, which is more sensitive than insurance, is at 100 per cent. So, why is insurance being treated differently?"
The regulator, the panellists said, would be the key. Basu said what the Act tried to do was to give more powers to Irdai. "We have to take it up from the industry-side and the regulator has to take it in the right spirit and have continuous dialogue so that we arrive at the best possible solution," he said.
Amid fear of a barrage of new regulations, the sector is also concerned about micro-management by Irdai. "Will the new Bill unshackle the sector? The answer is in the hands of the regulator," Srinivasan said. He added there was a risk of the regulator getting into the nitty-gritty and beginning to micro-manage. Principle-based regulation, not rule-based regulation, was needed, he added.
However, not all panellists agreed. Jacob said the changes brought about were for the better. He added for health insurance in particular, changes such as a separate vertical were good. "It might not necessarily lead to micro-management. There is a fair amount of opportunity given to insurers," he said.
Concern was also raised about the higher penalties proposed by the Act. Chaudhry said the fine of Rs 1 crore to be imposed on insurers for violations by agents was a concern. "A lot of responsibility is being placed on the company for them to ensure their intermediary behaves in a particular manner. At one level, this is very good but when it is translated into action, it might end up blaming the insurance company," he added.
Singhel, however, said while this would lead to more regulation, the regulator would look at enabling regulations, too. "When there were cases of mis-selling some years ago, the regulator came in and clamped down on such practices. But these were later removed to push growth," he said.
LIC's Kutumbe said it would be wrong to assume a steep penalty would be applicable in all cases. In any case, insurers wouldn't favour paying penalties not because of the money involved but because it might raise doubts about their business practices, he said.
The issue of open architecture for bancassurance was also discussed. While the Act has suggested banks be classified as intermediaries, Irdai is required to introduce provisions to enable them to sell products of multiple insurers.
The house was divided on the issue: While non-bank promoters said cases of mis-selling by banks were very high, those with banks as promoters didn't agree.
Srinivasan said the problem was banks were heavily involved in their core operations and insurance wasn't their cup of tea. "Today, we feel most of the grievances of mis-selling come from the bancassurance channel," he added.
Both HDFC Life and SBI Life differed. Basu said for his company, bancassurance complaints accounted for a fourth of the agency channel complaints. He added the minimum qualification of bank employees was much more than what agents had. He said agent productivity was much higher for the company compared to the bancassurance channel.
On his part, Chaudhry said the observations about mis-selling through the bancassurance channel were "highly exaggerated".
The problem is banks are heavily involved in their core operations and insurance is not their cup of tea. Today, we feel most of the grievances of mis-selling come from bancassurance channel
G Srinivasan
CMD, New India Assurance
Bulk of the FDI money will go to Indian promoters. It's not that the companies are getting hugely capitalised or that the money will be used to protect interest of customers
Sanjay Kedia
CEO, Marsh India
A lot of foreign partners are wondering whether they have to give away management control after increasing their stake and whether they should give away all the powers they have today
Amitabh Chaudhry
MD & CEO, HDFC Life
Banks may not be able to sell complex products because the level of personal interaction before and after sale may not be the same because they are an institution
P H Kutumbe
Executive director, LIC
The life insurance industry needs a lot of capital and may need listing. However, for general Insurance, capital requirement is not high. So the pressure on listing is also not high
Tapan Singhel
MD & CEO, Bajaj Allianz
The tolerance level on health insurance is very minimum. Irdai looks at what we are delivering to customers and we expect it. Every working day, there are 18,000 claims processed in health insurance
Antony Jacob
CEO, Apollo Munich
For us, bancassurance channel complaints is one-fourth of that of the agency channel. To become an insurance agent, you just need to have passed Class 10. Most banks take only graduates
Arijit Basu
MD & CEO, SBI Life
