There is a view that day-to-day functioning of an insurance company needs not be scrutinised
About five or six years ago, IRDAI mooted a proposal to move away from the existing file-and-use policy regime (in which the document for a new product has to be filed with and approved by the insurance regulator first before it can be sold) to use-and-file. The proposal has remained at the concept stage since.
Insurance executives would not go on record to talk about over-regulation in the sector but in hushed tones, they admit that stringent regulations have stifled product innovation.
This was not always the case. Insurance veterans H Ansari and Arun Agarwal, who in a research report last year said the industry was hobbled by over-regulation, said unlike some other regulators, the word 'development' was part of the mission and vision of IRDAI when it was set up according to the IRDA Act, 1999. Over the years, regulatory policy evolved to become less 'development'-oriented.
It is clear that broad structures are necessary to ensure policyholders are not misled or promised unsustainable features in a product. But insurers are of the view that some room for developing products and selling them directly must be allowed.
Take the case of third party motor insurance. The pricing is regulated by IRDAI. Combine the fact that insurance policy is mandatory for all vehicles running on Indian roads and India witnesses a high number of road accidents, claims are costly.
But with a strong transport lobby striking down even marginal changes in the pricing announced by the regulator, losses remain high in this space.
Similarly, the use of telematics that involves a device installed in a vehicle to study driver behaviour and thereby incentivise/disincentivise customers is not an industry-wide phenomenon. The regulator has set up a committee to bring out a report on this space.
There is a thin line between protecting policyholder’s interests and viewing day-to-day functioning of a company with a microscope.
While some progress has been made where IRDAI is open to meaningful innovation to make products simpler, the question is whether this is enough considering that insurance is still a push product and penetration remains abysmally low.Though the industry cannot be absolved of the past demons of misselling and opaque nature of products that led to customers losing faith, it has to been whether it is necessary to look into everyday matters of individual companies by an overall industry regulator.