By Venkatachari Jagannathan
Chennai, October 30 (IANS): Putting the house in order, working on its main mission of benefit of policyholders, speeding up the new business licensing process, avoiding micromanagement are some of the important tasks of the new chairman of the Indian Authority. Insurance Regulatory and Development Authority (IRDAI), said a section of industry officials.
They also said that the upward revision of the third-party automobile premium, simplifying its regulations, leveling the playing field are some of the other areas, the officials added.
In short, the new manager as and when he is appointed should transform IRDAI into a dynamic body.
“The post of president of IRDAI has been vacant since May of this year. It is also unclear whether the government is waiting for a bureaucrat to retire so that he can be housed at IRDAI,” said officials. industry officials at IANS, preferring anonymity.
“It is time for the government to appoint someone with a background in finance and business who knows what the risks are and how the protection is done.”
Regardless, the new head of IRDAI has several things to work out before tackling new things.
Industry officials told IANS that IRDAI has not licensed any new insurers in the past two years.
Even the Andhra Pradesh government’s initiative to establish a crop insurance company is delayed, they said.
“Globally, in the insurance industry, a lot is changing, focused on safeguarding the interests of policyholders, growth of the industry and the solvency of players,” the head of a large company told IANS. non-life insurer on condition of anonymity.
Industry officials told IANS that IRDAI has embarked on micromanaging the sector with various regulations justifying more oversight structures, leading to undesirable results.
“As you go into granularity, it removes the emphasis on insurance. IRDAI should first tackle structural issues,” a CEO of a private insurer told IANS.
Citing the underwriting losses experienced by non-life insurers, he added: “The regulator should consider whether companies are in the insurance business or investing.
According to the CEO, the stake that IRDAI should consider is to make insurers evolve towards profitability.
“As the country matures, interest rates will drop as well as returns on investment and therefore there will be a need for more capital,” he added.
The official also said the industry lacks the distribution capacity to underwrite larger risks like crop insurance.
While government insurers underwrite crops, livestock and other rural activities, the private sector focuses on urban and industrial / commercial enterprises limiting insurance penetration.
The CEO of the private insurer said the current limits on management fees should be maintained.
“IRDAI should level the playing field. The management expenses of private and public sector companies are almost the same. The payroll of private companies is around 10 percent. However, the advertising spending of government companies is around Rs 160 crore while that of the private sector is around Rs 3,000 crore, ”said the head of a large non-life insurer.
“For Rs 3,000 crore in ad spend, do we see that much ads on TV or in other media. So where does the money go? For much less spending, we see a lot of ads from property companies. fast consumption (FMCG), “added the manager.
“IRDAI should have a forensic audit carried out. Large sums are paid to car dealerships by private players under different headings. cum-Managing Director of a government-owned general insurer told IANS.
He said IRDAI favored private non-life insurers and cited the Auto Insurance Service Provider (MISP) directive allowing higher commissions to be paid to vehicle dealers.
“The expenses of an insurer are covered by the premium received. If almost 40 percent of the annual premium is paid to an intermediary, then there will be nothing left for the payment of claims,” he added.
Similar views have been expressed by private insurers unrelated to car dealerships.
Penalties imposed by IRDAI on insurers who break the regulations are not dissuasive as they view fines as an expense on huge income.
“IRDAI should order the insurer not to underwrite this line of business for a month. Such a penalty will be a deterrent,” industry officials told IANS.
Current and past senior officials of public sector non-life insurers have told IANS that upgrading motor liability insurance can be considered once the private sector cuts costs.
Almost 40 percent of P&C business comes from the auto insurance vertical and much of it comes from third-party risk coverage, insurers are not keen on changes leading to lower prices. bonuses and investment income.
Contrary to claims by general insurers that they suffer huge losses in the auto portfolio, figures from the Insurance Information Bureau of India (IIB) study show the opposite.
In its annual report on auto insurance for fiscal year 2018-19, IIB stated that a sum of Rs 35,519 crore in auto claims for vehicle damage (Rs 18,262 crore) and third party liability (Rs 14 257 crore) was settled during 2018-19, while the gross premium written was Rs 64,522.35 crore.
According to the report, the average settlement amount for death claims in the 2018-2019 fiscal year was Rs 9,01,207 and for injury claims it was Rs 2,51,094.
“Third party auto claim rates differ from state to state. It’s time to have rates for different states so the pricing is right,” said the CEO of a private insurer.
Officials said IRDAI should enable insurers to innovate and design new policies.
“The terms of the policy are defined. The basic product remains the same without any flexibility,” said a senior official at a private insurer.