A number, name and digital trail
Indian financial sector regulators need to understand that firms treat regulators with a public display of servility, but privately ridicule them
It made news last week when it was said that the Insurance Regulatory and Development Authority of India (Irdai) will regulate bank employees who sell insurance policies. This was surprising on two counts. First, Indian financial sector regulators are wary of crossing swords with the Reserve Bank of India (RBI). They often admit offline that though banks are the biggest mis-sellers of third-party financial products, they (the regulators) are unable to do much since the RBI is unwilling to accept that the problem lies in the sales process. And the legacy status of the RBI prevents them from sticking their neck out. Therefore, it is significant that the Irdai chief has said that he wants each policy mapped to the person who sells it and sales behaviour of the bankers will be recorded. And that leads up to the second reason for the surprise. Irdai has resisted growing evidence that shows mass-scale mis-selling in life insurance policies over the past 10 years. One has to only look at the poor persistency rates in the business to see that the industry is unable to retain even half its business over a five-year period. Remember, life insurance is a long-term contract and the product is structured to assume that the policyholder will stay for 10-15 years, if not more.
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