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IRDA’s 153 staff to regulate 47 insurance firms, which generate Rs 4.5 lakh crore per year
ET,Shilpy Sinha 8th Feb 2012
Regulation of any industry in any country is an evolving one, especially, those related to the financial services sector. But, what if the regulatory environment becomes a revolving one, unsettling the participants every now and then. That is probably the state of affairs in the Indian life insurance industry.
A decade of insurance regulation in India has come a long way, with policyholder protection being the primary concern, and with scores of new products and widening the options with 22 private life insurers. From a near state-run monopoly when pricing was its total discretion, the competition has lowered the cost of insurance and cover.
In its eagerness to deliver quickly, there have been at least four hasty decisions that have been either pulled back, or modified, disturbing the calculations of companies that sell insurance cover. Many decisions are still pending.
Guidelines on pension funds, lack of permission to invest, or hedge in available securities in which other institutions participate, flip-flop on the state of lapsed policies and enhancing the curriculum for agents.
"There were fundamental changes introduced in quick succession and it left little time for us to adjust," said GV Nageswara Rao, managing director and CEO, IDBI Federal Life Insurance. "For example, agents were not given enough time to prepare after the syllabus was changed and therefore, the pass percentages have fallen."
The revolving regulations are unwelcome at the industry level, which is on the threshold of coming out with listing of shares after a decade of wait. Of course, few know how to value those companies and with them being deprived of higher foreign investment limit, some may be forced to go for listing soon.
While the growth story is the easiest to sell, with millions uninsured, there is no dearth of the so-called opportunity. The reality, however, may be that many can't afford like they can't have bank deposits despite long years of campaigning for financial inclusion and no-frills accounts.
It is not the best of the years for the life insurers. New business premium income for life insurance has fallen 17% to 71,953 crore in April-December 2011, from 86,698 crore a year ago. Private sector companies had a 20% fall in income from sale of new policies during the period, for state-run Life Insurance Corporation, it was 16%.
Companies feel the frequent changes in regulations are the reason behind the slide. That is true. But there's another side to the coin, overall slowdown in the economy and inflation where higher portion of savings is eaten away by higher prices of essential goods, leaving little for financial savings and insurance.
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