Regulators must collaborate on international standards, says Irdai chief

The Insurance and Regulatory and Development Authority of India (IRDAI) Chairman Debasish Panda said that regulatory authorities should collaborate on international standards to ensure consistency and minimise regulatory arbitrage.

“…regulatory authorities should collaborate on international standards and harmonise regulations wherever possible, given the interconnectedness of the global financial system. This approach ensures consistency and also minimises regulatory arbitrage,” Panda said at the event organised by Excellence Enablers.

Further, according to him, there is also a need for continuous dialogue between the stakeholders of the industry who are engaged in feedback, in order to make necessary adjustments in the regulations on a real-time basis.

 

There is a need to shift from a purely punitive approach to one that emphasises proactive supervision and risk management. Early detection and prevention of issues can be more effective and efficient than taking punitive measures.

In order for the financial sector to strike a right balance between the interests of the stakeholders and the broader society, the regulatory framework should be both enabling and protecting at the same time.

In the backdrop of a financial and technological revolution making it necessary for the regulators to integrate innovations and technology into the framework. It has also made drafting regulations which can predict and provide for the future extremely difficult.

“The technologies including artificial intelligence, machine learning, blockchain, internet of things, telematics are changing the way insurance is perceived and also being transacted,” Panda said.

Further, he added that, “for example, I'm very certain that there could come a time when even the need for filing claims would be eliminated. Interconnectivity over blockchain would enable it to initiate instant payouts based on predefined triggers. Similarly, smart contracts may change the way banking is transacted. Algorithmic training in capital markets may also take the front seat.”

Speaking on the key points to ponder in corporate governance, Panda said that they should involve an environment where decisions are made for long-term stability and success of the institutions. The companies should also ensure a diverse composition of the board of directors, independent management, fostering innovation and ethical conduct, and crucially, the alignment of executive compensation with performance.

Corporate governance can be done by embracing more diversity as it enriches decision-making processes. Further, upholding independence and accountability is essential which will give an independent board authority to question and challenge decisions. Nurturing ethical conduct sets the foundation for a morally sound culture within the organisation.

Also, engaging with diverse stakeholders, incorporating their input into decision-making, and prioritising transfer and reporting along with integrating the Environmental, Social, and Governance (ESG) principles into the corporate strategy is of paramount importance, as it not only ensures regulatory compliance, but also contributes to the company's enduring prosperity.