Insurance Regulatory and Development Authority of India (Irda) chief TS Vijayan said the public listing of the first insurance company would be a milestone for the insurance sector and other companies will also prepare for listing. The insurance regulator said that there is no timeframe for listing insurance companies, and the discussion paper was to float the idea of listing. Irda is all set to give a final clearance to as many as six global players in the reinsurance market, enabling them to start operations by January 2017. Anurag Shah spoke to Irda chairman on the listing of insurance companies and his plans for the industry's growth.
India's first insurance company is just hitting the stock market. As the regulator, how do you see the listing of insurance companies? Do you think after the first listing many more players will queue up for IPO now?
All companies in insurance sector are expressing their keen interest in going public. Two dozen companies, barring Life Insurance Corporation (LIC), are all looking at what is going to happen. The first IPO in the sector is going to be the pioneer and if the response is good, other companies will be following it, because there are a lot of disclosure norms to be built on it. And how it is going to be discussed in the market will be keenly watched by other companies. So the disclosure and discussions which will follow will be like a guidance for other insurance companies.
For life insurance companies, will there be any mandatory timeframe for listing? What are the early indicators? Have they started discussions?
We have brought out discussion papers on it. Today you can see some companies are not in favour of it and some are neutral, and we are trying to evaluate whether to bring it to regulation level or not. We are discussing with people how it's really going to benefit them. Actually, the governance of the company will be improved. Capital is another issue. First, the company has to improve the governance, disclosures and it should lead to a discussion in the market so that the customer gets a better understanding of the insurance company.
A non-life insurance company has been asked by the government to go ahead for listing…
Public sector non-life insurance companies have not yet officially announced anything about the listing, but it may happen within two-three months. The listing which will take place will be a big option for the investors as well as the customers. They can see how well the company is performing, which is indeed a positive aspect.
As a regulator, are you happy with the growth of the insurance sector in the last two decades? What are the challenges you see going forward and what needs to be done to increase the penetration of insurance?
The insurance sector in India has grown in terms of premium collections from Rs 45,000 crore in 2000 to Rs 4,63,000 crore in 2015-16. The insurance penetration against world average and other Asian countries highlights much more ground to be covered. We need to focus on the number of lives or risks covered, spread across geographies, gender and level of insurance coverage, as clearly indicated by around 0.7% only insurance penetration observed for the Indian general insurance industry against the world average of 2.77%. The growth prospects are healthy for insurance business in general and particularly in property, health and pension lines of business.
How is FDI panning out in the sector after the insurance bill was passed? Going forward, how beneficial will it be to the insurance sector?
When FDI from 26% increased to 49%, rules also stated that the management control needs to be in the hands of Indian companies. The increase in the FDI cap will help in the penetration for insurance companies into the market. Through FDI, Rs 17,015 crore has come into the economy. This means that foreign companies are ready to give control to Indians just for the presence in the Indian market. Along with this, there are programmes to be set up both by the Irda and the government, which will help the insurance companies for faster penetration in the market.
When is Irda coming out with a commission structure? Will it be in line with the draft?
We will be able to finalise the norms and structure in the next Board meeting, which will be held in October. Starting with the process of formation of the structure, firstly, we discuss with everyone. We bring a draft. Once you see the draft, people will have their own feedback on this and then we again discuss it. Then it will be taken forward to the Insurance Advisory Committee. They consolidate the suggestions before it goes to the authority.
Talking about the technology, have you brought up any regulations for enabling the electronic offices and e-KYC?
We have already brought in Point of Sales. We are unable to see the increase in selling the policies at the customer service centre. So we are creating an enabling environment. Now Aadhar is accepted as a KYC document. The three crore people would not have taken up the prime minister's Bima Suraksha Yojna if it was a complex process. So electronic will be making it very simple for issuing the policies, servicing the policies and settling of the claims. This is the environment we are trying to make.
Nowadays, e-commerce companies are also selling insurance. So are there any complaints about the mis-selling of policies from this platform?
Specifically, we have not seen any complaints. What we are seeing is the product has to be approved, pricing has to be approved and the responsibility of the insurance company in the settling of the claims.
Till now, only aggregators were allowed to sell the policies and mutual funds. But now, we can see that a single company can do marketing of various insurance companies. What is the update on that?
We have brokers for this. The brokers' complaints have been quite high. They have their particular structure. We have allowed the banks to sell the insurance products of up to 3 companies. So insurance marketing is an extension of it. This evolving process will surely spread the need of insurance.
Recently, the motor vehicle act was amended and that has made compensation up to Rs 10 lakh as claim in case of accidents. So are the insurance companies happy with this?
Any insurance company will be ready to offer any claim provided they get a premium for that. You cannot fix the premium of 'X' amount and tell them to pay 'Y' amount of premium. So any insurance company will charge the customer appropriate premium, appropriate to the sum assured. But if something is to be paid over and above sum assured, and if the premium does not justify, then it will be a problem. Insurance premiums are calculated on the basis of the probability of the thing happening.
As the regulator, how do you see the growth of reinsurance business in India? Are companies showing interest?
Reinsurance companies may not bring in too much of capital. But, reinsurance branches will get opened. I am sure they are waiting for the regulator's permission and we are also trying to speed it up. It will boost the image of the country in insurance market worldwide. That would be positive for India.
Are there any new companies who have applied for reinsurance licence?
Currently, about 5 or 6 companies have come for the reinsurance licence. I think by January 2017, there are chances of new players entering the market. We will be taking a decision in the next Board meeting in October. Then they will have to bring in the capital and start working.
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