Irda Chairman J Hari Narayan, who retires in February, speaks to M Saraswathy about his unfinished tasks and the road map for the insurance sector. Excerpts:
Traditional product guidelines are awaited. When are those expected to be finalised?
The guidelines are in the process of finalisation. The final draft has already been sent to the Insurance Advisory Council for its advice, whereafter it will be placed before the board of the authority.
Before you retire, what are the regulatory guidelines on the anvil?
We are in the process of finalising the regulations on unit-linked products, non-linked products; and comprehensive regulations on reserving for non-life business and health insurance are also being finalised. Amendments are also being made in the regulatory architecture for reinsurance and appointed actuary regulations. The Health Insurance Regulation, 2012, are also being finalised. These would bring major changes in the health insurance sector.
Have you been able to address the issue of penetration for both life and general insurance companies?
Life insurance penetration rose consistently — from 2.15 per cent in 2001 to 4.60 in 2009 —before slipping to 4.40 per cent in 2010 and further to 3.40 per cent in 2011. However, penetration of the non-life insurance sector in the country has remained near constant, in the range of 0.55-0.75 per cent, over the past 10 years (0.71 per cent in 2010 and 0.70 in 2011).
India has reported consistent increase in insurance density every year since the sector was opened up for private competition in 2000. However, for the first time in 2011, there was a fall in insurance density. Overall, the level of penetration has increased, although much needs to be done going forward.
The attrition rates in the industry have been very high. What are the additional steps that will be taken to change this scenario?
To address the issue of attrition, Irda is examining the introduction of a senior-agent system. That will provide a career path for agents. We are also examining the introduction of a campaign to enable ex-agents to revive their licence and recommence their agency profession.
What are your unfinished tasks?
While a number of measures have been taken, there are issues that need to be addressed, including concerns on persistency and mis-selling. The high claims ratio in the health segment continues to be a matter of concern.
I am also envisaging that the industry would witness some degree of consolidation in the next financial year and some companies would also tap the capital markets to either raise funds or to enable their shareholders to unlock value. With the Insurance Amendment Bill getting approved, the regulatory framework for these would need to be put in place. Already, committees have been constituted and those are in the final stages of formulating reports. Those reports would be considered by my successor, who will have to take a call on the regulatory architecture to implement the changes.