'Central theme of reforms is to protect policyholders’ interests,' says insurance regulator IRDAI boss Debasish Panda

The Insurance Regulatory and Development Authority of India (Irdai) is on a mission to revamp and reform the insurance sector in the country and increase penetration. Irdai Chairperson Debasish Panda, 61, says the regulator’s emphasis is on lighter regulations and a consultative approach. In an email interaction with Business Today’s Teena Jain Kaushal, Panda shares insights on the sector, the changes planned and the way ahead. Edited excerpts:

Q: The insurance sector has seen several reforms in the recent past. What are your plans moving forward?

A: Irdai is actively working towards creating an attractive landscape in India’s insurance sector, aligning with the country’s resilient economy and business-friendly market. The primary objective of these efforts is to ensure the availability, accessibility, and affordability of insurance for all citizens and businesses. The initial reforms focussed on facilitating product launches, flexible capital raising, efficient management of expenses, expanding distribution channels, and enhancing reinsurance accessibility and facilitating setting up of new entities.

Moving forward, Irdai is striving to adopt a principle-based regulatory regime and implement lighter regulations, following a consultative approach. The proposed amendments to insurance laws include rationalised capital requirements, composite registration, one-time registration for intermediaries, value-added services by insurers, sale of other financial products, etc. Additionally, initiatives such as an e-marketplace protocol, localised women-centric distribution force, and simplified benefit-based products are being considered to further enhance accessibility, availability, and affordability. These reforms are expected to significantly contribute to insurance penetration, promoting a more inclusive and robust insurance ecosystem in India.

Q: Could you provide a broad framework of proposed e-marketplace Bima Sugam and how it will impact the industry’s dynamics?

A: A dynamic and evolving society requires faster and convenient solutions. The demand is for easy accessibility, efficient communication, enhanced customer engagement, prompt issue resolution, and valuable data insights. Bima Sugam, the contemplated insurance e-marketplace, is a step in this direction. The aim is to integrate it with India Stack to ensure seamless delivery of insurance services. It envisages providing an end-to-end experience to prospects and policyholders. It is conceptualised to be a one-stop solution with the facility to purchase, service and settle insurance contracts. It will also enhance digital access and scope for insurance intermediaries and enable assisted purchases to be a very seamless process.

The insights generated by Bima Sugam may lead to more prudent underwriting, information sharing, prevention of mis-selling and fraud. It is an attempt to universalise and democratise insurance and shift it from a push to a pull product. The larger intent is to slowly graduate towards building a financial market infrastructure to be rolled out in phases.

However, to embed insurance in the traditional fabric of the nation, we need brick-and-mortar presence, along with digital inclusion. To take insurance to each gram panchayat, a tech-led, women-centric localised insurance force called Bima Vahak is being conceptualised to distribute multi-line, benefit-based products with parametric triggers, that is, Bima Vistaar, which may greatly enhance accessibility, availability and affordability—which will significantly contribute to insurance penetration.

Q: The insurance regulator is in favour of giving composite licences to insurance companies. How will this affect existing players that have both life and non-life businesses?

A: Granting composite licences is one of the proposals for amendment of the statute. It would enable a one-stop solution for varied insurance needs of citizens. The insurance company would be able to offer multiple types of insurance products, which may lead to economies of scale. This would be beneficial for the policyholders as it may lead to greater affordability and improved accessibility of insurance coverage. The insurance companies are expected to better allocate their resources resulting in better and efficient capital management, again leading to rationalised cost of insurance for policyholders. Once the statute is amended, necessary regulations would be framed for the operation of composite insurers. The new dispensation, as and when approved, would provide a choice to the existing insurers. They may take a decision based on their business strategies whether to opt for a composite licence or to continue with their existing organisational form.

Q: Irdai has prescribed an overall cap on expenses of management (EoM) while allowing companies to have a board-approved commission payment policy. Many complain that it has intensified competition among insurers...

A: The comprehensive reforms [will] have overall positive implications for both the insurance industry and policyholders, by encouraging healthy competition, better affordability, improving service quality, increasing customer satisfaction, and promoting insurance penetration, thereby creating a more accessible and inclusive insurance landscape. This encourages a competitive market, allowing insurers to customise commission structures based on market needs. It would facilitate them to develop new business models, products, strategies, internal processes and enable them to fulfil the mission of Insurance for All. It would also provide insurers the flexibility to manage their expenses based on their growth aspirations. The board-approved policy enhances transparency, accountability, and adherence to regulations, enabling a more efficient distribution system and boosting customer confidence and satisfaction.

Q: A few players have recently been granted licences after a hiatus of five years. Can we anticipate further developments to increase insurance penetration in the country?

A: Irdai has the unique opportunity to develop the insurance sector, which necessitates ensuring availability, accessibility and affordability of insurance products for every person. A fresh landscape is being built towards achieving the goal of ‘Insurance for All’ by 2047. It is based on the foundation of ease of doing business, mainstreaming technology, lucrative opportunities and ecosystem revamp. The Government of India has also opened up FDI (foreign direct investment) in insurance up to 74 per cent (from 49 per cent). FDI in intermediaries has been permitted up to 100 per cent. The facilitations have garnered interest from the stakeholders, with four new insurance companies having been registered in the last one year and a few more applications are under consideration. This is a testimony to the interest being generated in the insurance sector of India. This may lead to more players, more expertise, more technology and more capital in the sector and thus ultimately towards realising our vision of ‘Bimakrit Bharat’ where every citizen, family, business will be adequately protected and insured.

Q: Insurers can now launch direct plans. Going forward, do you plan to make direct plans mandatory on the lines of mutual funds?

A: The central theme of all the reforms is protecting the interests of policyholders while moving towards a principle-based regulatory regime. That regime advocates laying down guiding principles and not providing strict prescriptions. Thus, the insurers have been permitted to exercise choice as per their respective marketing strategies based on dynamic and evolving demands of the market. All the general and health insurance products and a majority of the life insurance products are under the Use & File mechanism, thereby enhancing speed and fuelling innovation in launching insurance products. This could help enhance insurance inclusion in India. For example, today there is the need for DIY (do-it-yourself) products; several insurers have come out with such products. The present framework advocates for sufficient choice instead of providing any strict prescriptions, keeping the interests of policyholders central.

Q: Several insurtech companies have mushroomed recently, selling subscription-based plans. Many of them do not have a distributor’s licence from the regulator and they tie up with insurance companies. How does the regulator look at this unregulated space?

A: Appropriate action is being taken against anything that is offered in the name of insurance without necessary authorisation, as per the provisions of the law. Having said that, it is worthwhile to mention that innovation in every aspect is encouraged. The regulatory sandbox has been revamped to receive applications 24x7, 365 days a year. A monthly open house is being conducted at Irdai especially for insurtechs. A dedicated insurtech mission-mode team has been formed to make the sector tech-equipped. Entities that want to enter the sector must take advantage of these platforms to mainstream the innovations and register themselves as regulated entities, to make the sector more thriving and customer-centric.

Q: What’s the key challenge before Indian insurance firms today?

A: Irdai, along with the industry, has collectively undertaken the mission to insure every Indian, and provide insurance solutions to every business in the next 25 years, that is, by 2047. Currently, our insurance penetration hovers around 4.2 per cent as compared to the world average of 7 per cent. We have around 70 insurers for a country of 1.4 billion [people]. This untapped market is both an opportunity as well as a challenge for Indian insurance firms. The present number of insurance companies may not be sufficient to cover the market potential. Also, the product offering must innovate to enhance value for policyholders. To reach every nook and corner, technology can play a huge catalyst. More investments in technological systems as well as human capital is a must. Technologies like AI and ML and big data analytics are changing the face of insurance worldwide. There is a need to exploit all technological options available to create a seamless experience for policyholders. All of this would require growth capital.

As mentioned earlier, FDI limits have been increased to 74 per cent enabling further access to capital. The changing climate scenario also poses a risk and thus the insurance industry must equip itself to address this. The Indian insurance sector is the tenth-largest in the world and is at an inflection point. Per a report by [global reinsurance giant] Swiss Re, it is poised to become the sixth-largest by 2032. Considering the large and unique market that India offers, a significant opportunity exists to close the existing protection gaps. This is further facilitated by a robust economy, an expanding middle class, a young population, growing disposable incomes, and widespread usage of technology. This is the time when we need to increase our pace and firm up our resolve to take insurance to each and every citizen and business of India.

Q: What are the major challenges you see in the health insurance business?

A: In the current landscape, the health insurance business is facing both challenges and opportunities. The aftermath of the pandemic has led to a surge in demand for health insurance, necessitating insurers to adapt to evolving customer needs. To overcome these challenges, insurers are focussing on adopting technology. Creating efficient health exchanges can offer transparency and choice to consumers, simplifying the overall process. Insurers are also working on building strong networks of healthcare providers to increase cashless treatment facilities. Collaboration and industry initiatives aim to make the claim experience seamless and frictionless. By streamlining claims processes and leveraging technology such as automation, AI, and data analytics, insurers can improve operational efficiency, customer engagement, and gain valuable insights from data. Embracing technological advancements allows insurers to navigate the evolving landscape, meet customer expectations, and provide enhanced services in a growing market.

@teena_kaushal