Are we on the right track?
Let me begin by reiterating the IRDAI vision of ' Insurance For All' by 2047 and what it entails.
1) Every citizen to have an appropriate Life, Health & Property insurance cover.
2) Every enterprise is supported by appropriate insurance solutions.
3) To make Indian insurance sector globally attractive.
It is further stated that the focus of the IRDAI is to strengthen the 3 pillars of the entire insurance ecosystem viz. POLICYHOLDERS, INSURERS & INSURANCE DISTRIBUTORS.
Indeed, a laudable vision stated clearly in granular terms and the timeline too is extremely reasonable, 25 years starting from 2022, when this Vision was displayed and to be achieved in the 100th year of India's Independence.
Today, in 2024, the question uppermost in ones' mind is -- ARE WE ON THE RIGHT TRACK towards achieving this grand vision? In my humble opinion, as a member of the insurance ecosystem, the answer appears to be NO. My opinion stems from the following:
a) The nature and contents of Exposure drafts coming out for public opinion on matters surrounding this vision.
b) News items coming out in the media from time to time (not formal press releases) that create doubts in people's minds.
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c) Policyholder and his interest (as one of the 3 pillars stated) appears to be of little consequence and lack of cohesion, understanding and appreciation of each other's interest among the 3 pillars.
d) This lack of cohesion reflecting in the slow pace in our bid to this vision.
Let me explain each of the above aspects with examples:
The Exposure draft on Policyholders' Protection (combined with other allied matters of insurers) has NOTHING but two short paragraphs to show how claims of policyholders would be attended to. The existing regulations (even if disregarded in practice) had prescribed timelines for each stage of a claim depending on the class of insurance, the responsibilities of insurers and interest on delayed claim payments. In the name of simplification and ease of doing business, most of the existing provisions have been thrown out of the window, making life easier for insurers. One pillar benefitting at the expense of another.
Another exposure draft relates to submission of collaterals in the form of cash or bank guarantees by Cross Border Reinsurers, whenever claims are reported under the reinsurance policies. The reason as stated is to make sure that the interests of cedants and policyholders are protected from any CBR refusing to pay claims or facing insolvency. Laudable, yes but is it practical? Do we have data to prove that there have been numerous failures by CBRs to honor claims because of insolvency? That could be an eye-opener if indeed the financial failures are many in number. Indian market is not looked at too favorably by reinsurers and with an insistence on collaterals, many CBRs would shy away or charge much higher rates of premium to cover the opportunity costs on collaterals. Where will this leave the poor enterprise owner on the look out for " an appropriate insurance solution". He has to depend on foreign branches of reinsurers already present in India to whom these proposed regulations of collateralization will not apply. Can lead to informal cartelization and steep premium increases. If the thought process is to make more CBRs open offices in India/ GIFT City, am afraid that this regulation is not the right route to make the 'Indian insurance sector globally attractive'. Again, the policyholders' interest is not being looked at though this draft professes to be in the interests of policyholders.
Another shocker for individual health insurance policyholders -- News in the Press suggests that 'Cohort pricing' for individual health insurance policies is being considered i.e. insurers will be free to increase prices of individual health policies on renewal, if loss ratios are unfavorable. Nothing can be more draconian than this, especially for senior citizens. While the regulator has imposed a strict diktat that renewals of individual health policies cannot be denied if insured continuously, this seems to be an attempt by insurers to find a devious route to avoid lifetime renewals -- Raise the premium to unreasonable levels so that the policyholder has no option but to opt out. Surprising, since insurers have all along been stating that individual health is profitable and it is group health that bleeds them. Again, policyholders being ignored and interests of insurers alone seem paramount. A grave injustice, if this would be implemented and believe me, this will put us in 'reverse gear' in achieving the 'Insurance for All' vision. Hope the regulator would come out and scotch such misleading news spread in the Press through vested interests.
Should insurers not make profits? Most certainly they must, as without financially stable insurers, the insurance ecosystem will be in trouble. Should insurance distributors not earn adequate compensation for their services? Most certainly they must, but not align with insurers for 'super remuneration', with both ignoring the one who provides their daily bread -- THE POLICYHOLDER. So, it is quite apparent that cohesion between the 3 pillars is lacking.
After reading this, now answer the question relating to 'Insurance For All' by 2047 -- Are we on the right track? #insurance #2047 #insuranceforall #irdai #exposure #drafts #insurers #reinsurers #policyholder #rights #paramount # ignored #distributors #cohortpricing #individual #health # lifelong #renewals #devious #cohesion # lacking #DFS # MoF
Insurance and Finance Professional
8 个月I like the article bala. Like this one there are are many such articles posted. All read liked and forgotten Each of the key stake holders have their views in their own perspective But one thing coming to mind is that we as key stake holders are boneless to put the industry STRICTLY on right track
On a mission to Create Citizen Automators | Test Automation Solution Expert | No-Script Solutions Advocate | Accomplished Insurance Professional
9 个月A thought provoking article. As Hari has rightly pointed out, IRDAI is trying to do too many things and in an unstructured and unplanned way. That is creating confusion in the stakeholders. IMHO, even if they are doing many things at a time, if that is structured and done incrementally, will help market to absorb slowly and adopt quickly.
Technical Consultant, Reinsurance Practitioner, Member, Reinsurance Advisory Committee of IRDAI
9 个月Balasundaram R I was under the impression that many of these proposals are discussed with relevant stakeholders before being rolled out. The Regulatory office has come out with innumerable circulars, press release, announcements, changes in regulations - some within their scope and some beyond their scope - like fixing targets to companies, captive insurers, small insurance companies on the lines of rural and small finance banks, lowering the minimum capital for insurers, making India as reinsurance hub, periodic meetings with Insurtech companies, Bima Sugam, Bima Vistaar, Bima Vahaah - the list is very many. Many remain only on paper. It is an evidence that the stakeholders have not bought these. As you have mentioned a few, even those executed are not well thought of. There cannot be two different answers to your question’are we on the track’. I feel the industry is derailed.
In Search of Truth
9 个月Don't worry. Bima Sugam will solve every problem.
Chartered Engineer, Insurance Broker, Consultant & Certified Arbitrator
9 个月I think the IRDA is trying to do too many things at the same time, on the distribution side, on policyholder’ rights and interests, rural and social sector obligations, motor third party obligations, on reinsurance and so on. Too many changes will create problems of absorption for the market, besides causing losing focus and regulations getting scattershot. They should take a pause. They should take one thing at a time, deliberate well and implement before getting on to the next. No point trying to bite more than one could possibly chew.