Mumbai:
The Insurance Regulatory and Development Authority of India (IRDAI) Friday said it will set the timeline to reduce LIC’s shareholding in IDBI Bank from 51 percent to 15 per cent.
However, it added that the timeline will only be set after looking at LIC’s business plan post acquisition of 51 per cent stake in debt-ridden IDBI Bank.
“We will look at their (LIC’s) business plan (post acquisition of 51 per cent stake in IDBI Bank) and then decide on reduction of its stake in IDBI Bank (to 15 per cent),” said IRDAI chairman S.C. Khuntia on the sidelines of an insurance summit organised by Assocham here on Friday.
The insurance regulator in June had permitted LIC to increase its stake to 51 per cent in IDBI Bank. The government, which currently holds 85.96 per cent in IDBI Bank, had also approved the LIC’s proposal to hike stake last month.
The permissible limit for insurance companies to hold stake in any listed entity is 15 prt cent at present.
“LIC will have to safeguard the interest of policyholders while reducing it’s stake in the bank,” he said.
Unveiling his multi-pronged strategies to achieve deeper insurnace penetration in the country, Khuntia further said IRDAI) is working on guidelines for regulatory sandbox for certain innovative products that can be tried out in a limited scale and can be rolled out thereafter as full-fledged products,
“There are some new types of products which have not been tested out, Suppose some companies want to experiment with innovative products then we can allow them through a regulatory sandbox method where in a limited scale, either for a limited geography or a limited number of policyholders it will be tried out, so we will allow them,” said Khuntia
The IRDAI chief further informed that insurance regulator will also bring into place new methodology for quick product approval.
“We are also looking at opportunities to have more use and file kind of products so there I need co- operation from all of you,” he said adding that IRDAI is keen that insurers also launch long term health insurance products.
Khuntia suggested that after the Supreme Court has made it mandatory for three year third party motor policy and five year 2- wheeler policy, the general insurers should launch long term own damage policy and regulatory support will be available to them.
Sharing his views on further developing the micro-insurance sector, Khuntia said, “It is another area where we need to concentrate so that we go to remote, rural areas as this is something where our progress has been very-very unsatisfactory and insurance industry must look into this aspect.”
Expressing concern over lower penetration of insurance in the country which is only 3.69 per cent of the gross domestic product (GDP) as against global average of 6.2 per cent, he urged the industry to further spread awareness among the general public about the importance of insurance, especially among youth.
Highlighting the low persistency factor in India’s life insurance sector, he said it needs to be improved to gain more trust from policyholders. “If we improve thispersistency, we will have much more money available and that will go to long term savings which will result in much higher economic development in the country because long-term projects need a type of funding that can be supplied only by the insurance industry because we can invest it for a much longer period of time.”
He suggested that insurance sector can tap modern technologies like artificial intelligence, blockchain, machine learning and others for improving coverage, generating awareness, having innovative product designs and catering to the needs of consumers.
Talking about the government’s flagship national health insurance scheme, Ayushman Bharat, Khuntia said the insurance model will be more effective as the oversight in the model is better than the trust model.
“People will come down to the view that insurance model will be more effective because there is insurance industry oversight which is not there in the trust model,” he said
For Ayushman Bharat scheme, 23 of the 29 states have chosen to run the scheme as a trust model. In the trust model, the state government takes the risk and the entire payment has to be made by the state government, while in the insurance model, insurance companies take the risk and pays for all the expenses.
According to Moody’s, the trust model will diminish insurers’ growth prospects.