After setting the house in order by disciplining the insurance companies on unit-linked insurance products (Ulips), the insurance regulator has now set its eyes on the reinsurance sector.
Reinsurance is a method followed by the general insurance companies to cover and pass on their risk. Reinsurance is one area where the industry analysts see an immediate need to bring in more transparency.
With the general insurance companies and reinsurers following different accounting practices and also updating the data as per their corporate policies, there have been issues between the insurance companies and reinsurers facing accounting issues while settling balances.
“Reinsurance is top priority. Various aspects of reinsurance have to be strengthened and improved and we are working on that,” J Hari Narayan, Insurance Regulatory Development Authority (Irda) chairman, said.
Though the regulator said that there has been no specific complaint or dispute that has come to Irda’s notice for settlement, the reinsurance is being seen as one area that needs immediate alignment with the changing market conditions.
“It (reinsurance) requires a thorough overhaul,” the Irda chairman said.
The regulator recently cancelled the licence of Willis India, an arm of global reinsurance major Willis, for violation of norms. Willis is currently involved in two major insurance disputes which are pending settlement.
Irda is also of the view that the health insurance sector too needs to go in for redesigning of its products. With the cashless treatment evolving into a controversy with some of the insurance companies blacklisting major hospitals, there has been a demand for realignment of the health insurance products so that all the stakeholders read the same page.
“Insurance products are being constantly fashioned or re-engineered to keep in pace with the current requirements. That’s what has been done with Ulips. Similarly, reengineering will be done even for health insurance products. It is not just about cashless or reimbursement models, but it is the requirement with all the insurance products,” Hari Narayan said while not settling any timeframe for kicking off the review process.
On the issue of allowing the insurance companies to tap the capital market for raising funds, the Irda chief said that there is no update on the process from the market regulator Securities and Exchange Board of India.
“According to the law, a company could go public in ten years of existence and it will be in 2011. I am sure the IPO guidelines will be in place much before that. But, no company has approached us so far with their IPO plans,” he said.
Following new norms for Ulips , about 60-65 redesigned products have come to the Irda for approval and the regulator feels that the process of redesigning products as per the new norms would now be a continuous process. However, the Irda chairman said that it is still early days to assess the impact of the new products on the companies.
“It is too early. New norms have come into effect only in September and only after two or three months, the companies also will be able to assess the impact,” he said.
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