``Presence of a health regulator would have ensured treatment protocols, reasonability of charges and quality of service in hospitals''
In an interview with Asia Insurance Post, Subhash Chandra Khuntia, who, on Thursday. will be completing his three year term as the chairman, IRDAI , highlights some of the burning issues of Indian insurance industry and how the regulator is addressing them
How do you see 20 years of liberalisation of the Indian insurance sector? Is it a success story? What more need to be done?
The liberalisation of the Indian insurance sector has been beneficial in several ways. The insurance penetration has increased from 1.93% of GDP in 1999-2000 to 3.76% in 2019-20. From five companies in the public sector, we now have around 60 insurance companies with most in the private sector. Due to competition, the efficiency and reach have increased and premium rates are among the lowest globally.
In future, further enablement is needed for the insurers to be innovative and to use the latest technology and IT so as to continuously address the emerging customers’ needs.
One of your main agenda was to increase the penetration in the insurance sector. Have you managed it well or is it a job in progress?
The insurance penetration has increased, but the increase is still quite insufficient. As against global average of 7.23%, Indian penetration is low at 3.76%. Particularly, the penetration in non-life at 0.94% is almost one-fourth of the global average. There is tremendous scope for increasing this penetration. Recently, the IRDAI has submitted the report of a high level committee to the Government outlining concrete short-term, medium-term and long-term measures for increasing insurance penetration.
Though, there have been debates whether India needs more insurance players no new players( a few existing players have just changed ownership in recent years)) have entered Indian market for the last few years particularly in life side, Do you think Indian market has reached its saturation on the point of number of players it has now?Has IRDA rejected more new applications rather allowed in the last two years for various reason?
Looking at the size of India in terms of population, geographical spread, diversity and low insurance penetration, there is tremendous scope to have more insurance companies. The market is far below the saturation point. At the same time, as a regulator, we need to allow only credible companies that satisfy minimum eligibility conditions. We do not have any target for acceptance or rejection of applications, but each application is evaluated strictly on merit.
There are also concerns that Indian players don’t have much profitability after so many years of operations. What is IRDAI’s take on it?
Normally, it is expected that general insurance companies should break even in 5 years and life insurance companies in 7 years. Unfortunately, several companies have taken longer for various reasons, though a few have been able to achieve that. The managements of the companies need to devote more expertise and energy in that direction and must reach out to unexplored areas and target groups rather than competing for the same small set of customers based in metro cities. The Authority is constantly working with the insurers to provide supportive regulatory framework.
How long now it will take for the IRDA to unveil Risk Based Capital(RBC) regime in the Indian insurance industry?
We are committed to usher in risk-based capital (RBC) framework, which is more objective and beneficial for insurers that manage risk well. It should be possible to change over in a period of 3 years. We also plan to synchronise with the new accounting standard Ind AS 117 based on IFRS-17.
Do you think insurers are not able implement IRDA guidelines properly in the matter of Covid-19 hospital charges and claim settlement as they don’t have much control over hospitals?? Is it also the time for a health regulator in the country?
Insurers have been instructed by the Authority to be extremely prompt in issuing hospitalization authorization and for claim settlement with hospitals so as to utilize the hospital beds to the optimum extent for treatment of covid-19 patients. Hospitals also need to cooperate in this.
Presence of a health regulator would have helped in terms of adherence to treatment protocols, reasonability of charges and quality of service in hospitals.
There have been hue and cry about the high premium hike the insurers are supposed to be effecting in health insurance policies. Is IRDAI seized of the matter and what is your take on it?
It has already been clarified that there has been no such steep hike across the board for health insurance. Despite additional pressure due to covid-19, insurance companies have been able to manage their affairs without any disruption. The Authority is also monitoring the situation closely for remedial action, as needed from time to time. The interest of all stakeholders in the insurance sector must converge on protection of policyholders’ interest at this critical juncture.
There was a high powered panel formed under you for taking forward reforms in the Indian insurance sector? Is it possible to comment about any outcome?
As I have already mentioned, this Committee has already made recommendations on increasing the insurance penetration in the country. It has also taken up several other themes like protection from natural catastrophes, building up of actuarial profession, insurance for farmers and rural areas etc.
IRDA had plans to launch a pilot project to insure some segment of population against natural catastrophes . What happened to that?
A proposal to initiate pilot projects covering some States or districts prone to natural disasters like cyclone and flooding has been sent to Government and the National Disaster Management Authority. The idea is to cover all dwelling units in a vulnerable geographical area against natural catastrophes. The cost of coverage upto a limit can be funded by the Government and the owners can pay additional premium for higher coverage.
Since dwelling unit insurance is very cheap, this is quite affordable and feasible and will save Government expenditure in terms of compensation to the affected after the incident.
FDI upto 100 % has been allowed in the Indian insurance intermediary sector. Any proposals from any players for this?
This was allowed as per budget announcement in 2019 and we have not received many proposals.
How soon , players now can raise their stakes to 74%? Are all rules and regulations for it are in place?
The relevant provisions of the Insurance Act, 1938 have already been amended. The draft amendment to the Rules has been notified inviting suggestions from the public. Once the final amended Rules are in place, which are likely soon, the relevant Regulations will be amended. The entire process is likely to be completed within a couple of months.
Are IRDA’s Sandbox regulations to bring in innovation in the sector giving any results?
Regulatory sandbox was introduced by IRDAI in August 2019 to encourage insurers and other players to introduce innovative products and services. The first window attracted 173 proposals and 67 proposals were given approval. The performance is very satisfactory. The second window attracted 185 proposals.
The IRDAI will analyse the results and where it is satisfied that an innovation is desirable to be adopted in the long run for the benefit of the insurance sector, necessary modifications to the relevant Regulations will be done to allow all such products and services from all insurers in future.