In a bid to overhaul the Indian insurance sector, almost after 20 years of liberalisation of the industry, the centre has appointed a high level panel under the chairmanship of S C Khuntia, chairman,IRDAI, just before the Modi government is ending its five-year term.
The panel, which has been constituted by the Prime Minister Economic Council(PMEC), on Jan 4, to bring about sweeping changes in the Indian insurance sector including examining the lacunae in the existing various acts-the Insurance Act, 1938 and the IRDA Act 1999- governing the insurance industry and has been given a time frame of six months to prepare the report.
“A working group under Khuntia has been constituted last month to review everything in the Indian insurnace industry and suggest measures for reforms. They have been asked to submit the report in six months to the Prime ministeroffice,’’ said a senior official of ministry of finance.
Nilesh Sathe, member, Life, IRDAI, Poornima Gupte, member, Actuary, IRDA, Member, Non-life, IRDAI, Rajesh Dalmia of Ernst & Young and Joydeep Roy of PwC,SB Mainak, a former managing director of Life Insurance Corporation of India, are some of the members of this high powered panel.
Mr. Randip Singh Jagpal, chief general manager, IRDAI, is the member secretary of the panel.
Dubbed as the second Malhotra Committee,which was constituted in 1993 by the then government under the chairmanship of RN Malhotra, a former governor of the Reserve Bank of India , Khuntia Panel assisted by chosen experts, will propose recommendations for wide ranging reforms in the existing insurance sector.
Following the recommendations of the Malhotra Committee report submitted in 1994, the IRDA Act 1999 was passed by the Parliament in 1999 amd the Insurance Regulatory and Development Authority (IRDA) was constituted as an autonomous body to regulate and develop the insurance industry and private players including foreign players were allowed in the sector..
Analysts have observed that the reviewing the functioning of 20 years of liberalisation is over due and Khuntia Panel can provide inputs for the further legislative and regulatory changes to bring about the necessary changes paving the ways for higher growth and contribution of the sector to the Indian economy.
“Today, IRDA more stands for the regulations and less for development that should have been otherwise,’’ said a CEO of a private sector life insurance company.
One of the main area of concerns, according to the analysts, in the development of the existing insurance sector is that even after two decades of liberalisation,the insurance penetration in the country is very low, at around 4 per cent.
H Ansari, a former member of IRDAI and Arun Agarwal, a well known insurance professional, in their well documented recent report have pointed out several gaps that are hindering the growth and development of Indian insurance industry and a higher ranking in the international insurance industry.
A 1 per cent rise in insurance penetration translates into 13 per cent reduction in uninsured losses – an increased investment equivalent of 2 per cent of national GDP, and a 22 per cent reduction in the taxpayers’ contribution, the report said..
With 17.5 per cent of the world’s population, the Indian insurance market accounts for less than 1.5 per cent of the world’s total insurance premium, the report said..
This is despite 2019 being the 20th year of market opening up; India being a single market for insurance; Government pushing for a fully insured and a fully pensioned India; insurance regulator having a mandate to develop the market.
Some of the lacunae in the existing indian insurance system as pointed out in the report are:
-Regulations are rule-based (the buck stops with regulator for every thing and it is one size-fits-all), prescriptive & shifting
-Regulations are more on input management than outcome based that stifle innovation
– ‘Development Agenda’ is never on offer, emphatically
-Free competition, and level playing field are not the guiding principles
The report suggests that Mumbai as ‘Global Insurance Centre’ to be supported to be supported by regulatory thought leadership and ‘Insurance Arbitration Hub’;
‘Mumbai Reinsurance Hub’ to be supported by level playing legal forms/regulations and cluster synergies with International Financial Services Centre (IFSC),that is competitive to Singapore, Dubai, London and China. All to be supported by consistent and simple tax rules.