The insurance industry may meet the fate of aviation and telecom sectors if product prices are kept low, warned Insurance Regulatory and Development Authority of India (Irdai) Chairman Subhash C Khuntia on Friday.
Khuntia said insurance brokers account for around 43 per cent of the premium collected in the case of group health insurance products. “But, I need to give a word of caution here. Though the share is very high, the loss ratio is also high. It’s not sustainable at present. Insurance companies, intermediaries and policyholders need to unite to create a sustainable atmosphere,” Khuntia said in New Delhi at an event organised by the Insurance Brokers Association of India.
He said in the case of “unfair competition”, other industries, particularly aviation and telecom, have suffered but their customers have not. “But we cannot afford such a situation in the insurance industry as it protects customers. If the insurance industry suffers, the clientele will also suffer and as a regulator, we would not like that to happen.”
Aviation is a highly competitive sector where a low-fare regime has been a cause of concern for some airlines. The government has often termed it as “predatory pricing” and cautioned industry against keeping airfares too low in a bid to elbow out competition.
Similarly, the telecom industry is reeling under stress because of fierce competition, especially after Reliance Jio entered the market three years ago. Bharti Airtel and Vodafone Idea posted their biggest losses ever recently.
Asked if companies are engaging in predatory pricing to raise their volume, Khuntia acknowledged it, saying “of course, of course”. “The regulator will have to ensure industry runs sustainably. There will be a host of actions, not one kind of action (to check predatory pricing) but we will ensure that the health of insurance industry does not deteriorate,” he said.
The regulator also told insurance brokers to be more disciplined in filing their returns and said it is working on consolidating regulations related to insurance intermediaries in a bid to do away with multiplicity of rules.
“I have told officers that there is multiplicity of regulations for intermediaries and there should be common norms to the extent possible and specific norms for different categories. We need to bring all intermediaries in one regulation,” he said.
Irdai introduced a Business Analytics Project portal six years ago, automating the process of registration and other connected activities of insurers, brokers, among others. Khuntia said of the 459 brokers, 364, or about 80 per cent, filed return for the financial year 2018-19.
“Some brokers are not submitting the annual returns in time and some are not following the process at all. We should be more disciplined,” he said.
Asked about his view on raising foreign investment in the insurance sector from the current 49 per cent, he said Irdai had sought opinions of stakeholders on raising foreign holding to 74 per cent and comments received have been forwarded to the government.
“Now, according to the Insurance Act, 49 per cent is the maximum limit for foreign direct investment. If it goes to 74 per cent, naturally, the Act has to be amended,” he said. However, he was non-committal on ownership and control. No decision has been taken, he added.
With inputs from Press Trust of India