Government has formed four committees to take stock of insurance business with representation of insurance companies, insurance bodies, rating agencies and financial ministry officials. But it did not have representation from IRDA. Though as per IRDA since the post of member life is vacant no one attended the meeting.
Government and Insurance Regulatory and Development Authority (IRDA) has been at loggerheads since finance ministry directed General Insurance Corporation of India (GIC) not to pay ceding commission to general insurance companies for the business that they have to mandatorily reinsure with GIC Re. In that situation IRDA had to step in and force GIC Re to honor the contracts with insurance companies.
Panels will prepare a roadmap for insurance industry in India. It will also find ways to increase the penetration of insurance. And it will also work on the steps that need to be taken in short-term and long-term. Four committees will also look into issues related to the growth of the industry, development of products, issues with regulators and other bodies.
In its first meeting government also asked insurance companies and other agencies feed backs including on IRDA.
The consultation process is the part of finance ministry’s plan to set up advisory groups across segments to discus issues impacting the sector and finding the solutions for these problems.
These committees have been formed under these advisory groups to take industry-wide consultations.
As per insurers there is a need to rationalize the regulatory part and focus on development.
Life insurance industry had to face many challenges on account of regulatory changes brought by IRDA. Due to regulatory changes brought by IRDA on Unit-Linked Insurance Plan (ULIPs) insurer’s new business premium collection dropped to 15% in 2010-11 against 25% in 2009-10. This year from April-December premium growth fell by 17% to Rs 71,954 crore.
After bringing sweeping changes in ULIPs IRDA also announced comprehensive changes in pension plans on both traditional and unit-linked platforms. As per insurers though these changes are customer-friendly but they also say that IRDA does not give them enough time to implement and adjust to new regulations. For instance IRDA brought in changes in pension plans in November 2011 and asked insurers to refile new products by January 2012 hence, due to this pension market in the country has become vacant.
State-owned Life Insurance Corporation of India (LIC) has crossed one million mark in cumulative lives covered under its health insurance segment.
