‘There’s need for greater amount of regulation in the initial stages’

Hyderabad: Chairman of the Insurance Regulatory and Development Authority (Irda) Chellapilla Satyanarayana Rao has seen the industry he monitors grow by around 100% in the past year alone. Across the life and non-life businesses, Indian insurance firms now collect around Rs1 trillion in premiums. In an interview with Mint, Rao said he would like to see the industry move from its existing solvency-based capital model into a risk-based one. This would mean firms allocate varying amounts of capital to different businesses, thereby ensuring more efficient use of capital. Rao also said the industry requires more (not less) supervision and regulation for a few more years. Edited excerpts:

Are you satisfied with the way the insurance industry in India has grown?

Our insurance penetration has increased from about 2.3% in 2000 to 4.8% (this year), nearly doubling over the last seven years. Insurance density has improved from about $10 (Rs394) in 2000 to about $38. If we can sustain this rate, it is quite possible that in the next decade or so, we would have gone far beyond our Asian neighbours.

The market has grown at around 100% in the last year and it may be difficult to achieve similar growth rates going forward since the base itself has become very big. But the growth will definitely be higher. Today, the premium collected by the life and non-life insurance industry is more than Rs1 lakh crore as against around Rs20,000 crore seven years ago. I am quite satisfied with the way the market has grown, deepened and widened, so far.

The fact that a large number of companies in the West are looking for investment opportunities here for setting up new companies itself indicates that they sense a great scope for further expansion. That is on the life side. On the non-life side, I feel that there is a huge potential and growth possible in the health insurance.

When it comes to the structuring of products, the onus is on the regulator as it clears not just the product, but also the advertising campaign and the illustrations used. Both customers and companies can always blame Irda if things go wrong. Don’t you think companies should be encouraged to be more innovative with products? And should they not be held more responsible for their own products?