Mumbai: Till recently, detractors of the Insurance Regulatory and Development Authority or Irda used to call it a lobby and not a regulator. But not any more.
J Hari Narayan, 62, Irda chairman, is transforming the organisation. To start with, he has tightened the norms for unit-linked insurance policies or Ulips. This will hurt the companies as their margins will be under pressure and the distributors will not be excited to sell Ulips as their commissions have been cut.
J Hari Narayan, Irda chairman
But the bureaucrat-turned-regulator is unfazed as long as he is able to protect the policyholders’ interest.
Edited excerpts of an email interview:
You have brought in too many changes in Ulips too soon. Is the trigger for this the debate on who will supervise Ulips?
You seem to be too keen to justify that the Ulip norms are as stringent as any other financial products in the market. It is significant that you have pointed out that the changes in Ulips are timely. This is so because several measures were under examination and the introduction of these were delayed because of the regulatory debate on Ulips. It should be remembered that Ulips are products which were introduced only 3-4 years ago and periodically Irda has been bringing out regulation having regard to the experience in the Indian market. It should also be recognized that regulatory intervention is an ongoing and continuous process.
For years, Irda has been touted as an industry lobby than as a regulator. Now, the perception has changed but it has come at a cost. Life insurance companies have started blaming Irda for micromanaging the business.
Generally, Irda was of the view that regulatory intervention in product design would inhibit innovation. However, the global crisis has revealed that excessive innovation may significantly impact the development of a satisfactory market. The question is not one of micro managing but the question is one of the right balance of regulation.
If Irda was aware of mis-selling, why didn’t it take any action in the past ten years?
As I had pointed, Ulips are young products in the Indian market and they were not in existence for 10 years as suggested by you.
Now there will be a dedicated committee to deal with regulatory tussles on hybrid products. Isn’t it a threat to the regulators’ freedom?
What has transpired in the recent past is a greater role clarity with regard to Irda and Sebi (Securities and Exchange Board of India) with regard to regulatory control on a given financial product and such role clarity is necessary. It is important that there should be a defined mechanism to enable the role clarity to be established as and when the situation so demands.
The industry will adopt a new approach towards business altogether at a time when many insurers are on the verge of breaking even. Many insurers will have to infuse more capital and may have to write off more losses and this will hamper growth. Aren’t you concerned?
It is true that the break-even point has been pushed back. A careful and detailed analysis reveals that the break-even point has been pushed back because of higher than projected management expenses. This is one of the reasons which prompted Irda to intervene in a manner which would reduce such expenses and enable the industry to attain break-even sooner than later.
Many insurers are planning to shift focus to traditional life insurance products and this may lead to mis-selling of such products. How will you tackle this?
Mis-selling is a result of the interaction between the agent and the prospect. Both have responsibilities. As long as these are clearly recognized and followed, scope for mis-selling will decrease.
Irda has set up a dedicated call centre to deal with customers’ grievances. Just another move to control mis-selling?
The principle objective of setting up of Irda was the protection of the interests of the holders of insurance policies. In pursuance of this primary objective, it had earlier mandated the establishment of appropriate grievance redressal mechanisms in every insurance company. In furtherance to achieve this objective, the Irda has set-up a call centre to handle consumer grievances and has separately set up consumer grievance cell.
Why most of your moves are directed at Ulips?
It is incorrect to suggest that Irda is working only on Ulips. There are several important issues which we are working on. Firstly, the convergence of the Indian accounting standards with the IFRS (ZZ) , the settlement of norms which will relate to the issuance of IPOs (initial public offers) and M&As (mergers and acquisitions), the establishment of a more robust system to collect and disseminate appropriate insurance related data and several other initiatives.
How do you see the growth of the industry in the new decade?
A decade has passed since Irda was formed and the insurance industry has moved from its infancy towards the beginning of maturity and the regulatory architecture will respond to these changes. In the new decade, I expect the insurance industry to grow at a slower though a healthy rate. I would expect a greater building of trust between purchasers of insurance products and the industry and on the whole I would expect the decade to see the building of a truly robust and dynamic insurance industry.
How is Irda preparing itself to meet the the new challenges?
Irda itself is preparing for the challenges which lie ahead by investing in human capital and improving the capabilities and capacities within the regulator’s office. At a parallel level, it is concerned and is actively involved in building the academic and training apparatus which would generate the man power required for the growth of the industry. Finally, Irda is interacting with experts to finetune the regulatory architecture to serve the interests of India and the insurance industry in India in the future.