By Venkatachari Jagannathan

Chennai, Jul 4 (IANS): The Indian insurance regulator should move cautiously while making changes to the over two decade old regulations that seems to have prevented companies going belly up like several finance companies, said experts.

The Insurance Regulatory and Development Authority of India (IRDAI) has made some regulatory changes and is also mulling more.

The new IRDAI Chairman Debashish Panda told the life and non-life insurers that every Indian should have an insurance policy.

He also told the non-life insurers that the insurance penetration should go up to 2.52 by FY27.

This in turn means the Indian non-life sector would grow from Rs 2.20 lakh crore premium in FY22 to a whopping Rs 11.73 lakh crore by FY27

"Regulations are not cast in stone and well calibrated regulatory changes are required from time to time. But they have to be in line with the core principles of insurance and not in abrogation of the core principles even if insurers want it,a K.K.Srinivasan, retired Member (Non-Life), IRDAI, told IANS.

"Also frequent regulatory changes can de-stabilise the market," he added.

"Soon after the regulations were drawn up, they were studied by foreign sectoral experts who found them to be more than adequate," a retired IRDAI official told IANS preferring anonymity.

An insurance advisory group appointed by the Reserve Bank of India (RBI) too did not find anything seriously wanting in the insurance regulations.

The insurance advisory group was headed by R. Ramakrishnan, consulting actuary and a member of the Malhotra Committee on insurance reforms.

Except for a few regulations that have been framed by the IRDAI, the insurance advisory group has found the domestic rules are in sync with international practices.

The group had relied on the various reports of the International Association of Insurance Supervisors (IAIS) and the insurance guidelines issued by the Organisation of Economic Cooperation and Development (OECD).

"The IRDAI Act specifies very clearly the two basic aims of the Act. (a) Protection of policyholders' interests and (b) Ensuring orderly growth of the insurance industry. Any change in regulations that tinker with the two basic aims of the Act are bad in law apart from being bad for the market," Srinivasan said.

Referring to IRDAI Chairman's view of every Indian becoming an insurance policyholder Kamesh Goyal, Chairman, Go Digit General Insurance Ltd told IANS: "This obviously requires more investment, competition to reduce pricing leading to more employment in industry.

"I find the vision simple and bold at the same time. We have seen IRDA move in this direction at breakneck speed in the last three months. Both Prem Watsa (Founder and Chairman of FairFax Financial Holdings, Canada) and I are excited with this vision and are exploring setting up both an Indian reinsurance company and a life insurance company."

With insurance being a push product, reduction in prices, increasing competition are the two major ways to achieve Panda's goal.

"Fundamentally insurers are pool managers of policy holders' funds. They are expected to manage the pool at minimal costs. While policy holders legitimate claims are within the purpose of the pool, exorbitant expenses of the insuranceA companies are not," Srinivasan said.

According to Jasleen Kohli, Managing Director, Go Digit, the competition amongst the insurers should increase with insurance being made available to customers through every distribution channel possible with an open architecture.

Kohli said there has to be an open architecture in respect of bancassurance, banks acting as agents for insurers.

Currently a bank can be an agent for only three insurers which is anti-competition and policyholder unfriendly.

She said there was a premium reduction of about Rs 2,000 crore for the policyholders when the IRDAI in 2019 forced some vehicle makers to empanel 18 non-life insurers.

"If distribution is restricted, it will always result in higher prices for customers and poor service," Kohli said.

To reduce the premium for the policyholders, the expenses of management (EOM) of insurers has to go down.

Stressing that there is a definite possibility of EOM going down by at least five per cent for insurers, Kohli urged IRDAI to draw a roadmap stipulating in the next 2/3 years each insurance company should reduce their EOM by 5 per cent.

A single limit of EOM, with business line wise limits is important so that savings in one business is not spent on another line, she added.

Terming relaxation of solvency norms as a perilous path Srinivasan said: "Prudent investment norms ensure that insurance companies don't run amok with policyholders funds. They also ensure that insurance companies do not run into solvency issues. Not having an insurance company is perhaps better than having an insurance company with serious solvency issues."