annual report 2008-09 - IRDA

ANNUAL REPORT 2008-09
The moment of truth in an insurance contract lies at
the time of claim settlement. It could be at the end of
several years in the case of some contracts. Being
so, it is bound to leave a heartburn for the policyholder
if it is repudiated. Ideally, when the two parts of the
contract have been fulfilled totally, there would be no
repudiation. Claim repudiations occur owing to several
reasons – some deliberate and others inadvertent. In
a domain where the awareness levels are low, there
is a need for extending additional help in order to
obviate the problem of repudiation. The role of the
distributor in this regard is very crucial.
IRDA is finalizing an insurance awareness campaign
through mass media, mainly through print, television
and internet, which aims at educating the public in
general, as well as policyholders on what is insurance,
the need for insurance, whether insurance is
adequate, risk management, what is life insurance,
what is general insurance etc. through various
creatives. Simultaneously, IRDA is working on certain
internal channels such as an exclusive consumer
education web-page and publication of certain sample
booklets on the aforementioned topics, which contain
generic information, which insurers would also be
advised to publish and distribute.
In India, endowment products have been dominant in
insurance as they provide a component of savings
also. As long as the business was being conducted
only by the public insurers, this was not felt as a great
constraining factor. However, in the aftermath of
liberalization with the opening up of the sector, some
insurers are offering flexibles. While it is very difficult
to come out with fresh products, the flexibility afforded
through riders in life insurance and add-ons in nonlife
insurance comes in very handy for providing
customized solutions for the policyholders.
In India, the solvency regime in the insurance industry
is simple and there is a thin line of demarcation
between a risky portfolio and a not-so-risky one. In
some developed insurance markets, Risk Based
Capital (RBC) is put in place which aims at better
deployment of capital resulting in higher profitability.
As IRDA intends to move towards the RBC regime
eventually, it should be our endeavour to develop a
robust, wide and deep database, so as to ensure that
the implementation of RBC is possible.
Distribution plays an important role in widening the
insurance market. While the tied agency system
worked well in a monopolistic regime, the introduction
of brokers, corporate agents including banks and other
alternate channels of distribution of insurance have
impacted the insurance industry in India. The third
party administrators for health insurance are working
well. These channels helped insurance growth.
Agents, who are the first persons to meet the
prospective buyers of insurance, need to be well
trained and fully equipped with the knowledge about
the products. As the agents are acquainted with the
prospective buyers, they have to advise them on the
suitability of the product rather than on the commission
they may earn in the process. In this regard, insurance
companies need to develop dedicated and efficient
workforce and motivate them at frequent intervals. In
this way, best practices evolve.
The interests of the policyholders can be well protected
if the premium collected from them by the insurers is
properly and prudently invested. With this endeavour,
the Authority has revised the investment guidelines
prescribing the way in which funds can be invested.
Besides, the Authority monitors the investment
portfolio of insurers on a quarterly basis, to assess
whether the norms prescribed by the Authority are
being followed by the insurers. In order to see that
these are properly reflected in the financial statements,
the accounting norms are also laid down.
IRDA has prescribed formats for submission of data
both for regulatory requirements and also for other
purposes. This data needs to be properly analysed
so as to assess whether the regulated entities are
following the prescribed norms as well as to find out
whether company is solvent at all points of time. As
these formats are prescribed under various
regulations, IRDA is at present engaged in integrating
the statistical as well as qualitative data submitted by
the insurance companies. For this purpose, the data
analytics project for facilitating technology aided
analysis has been worked out and the project is at an
advanced stage. The scope of the project can be
aligned with the Insurance Information Bureau which
is at present operating from Hyderabad for motor and
health data analysis. In order to arrive at proper and
meaningful conclusions it is pertinent that the
regulated entities submit the data in time and also to
see that data is error free, thus ensuring quality of
data.
Performance in the first quarter of 2009-10
(i) Life insurance
During the first quarter of the current financial year
life insurers underwrote a premium of Rs.14456.34
crore, marginally higher than Rs.14320.20 crore in the
comparable period of last year. LIC accounted for
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