Hospital regulation, insurance penetration key tasks for new Irdai chief

After a nearly 10-month wait, the post of chairman of India’s insurance regulator has been filled. The government has appointed Debasish Panda, former secretary, Department of Financial Services, to the top position of the Insurance Regulatory and Development Authority of India (Irdai) for three years.

After S C Khuntia demitted the Irdai chairman’s office in May 2021, the insurance regulator functioned without a chief. Part of this period coincided with the devastating second wave of the Covid pandemic, which resulted in a flurry of claims for both life and non-life insurers. Also, the initial public offering of insurance behemoth LIC was given the go-ahead by the regulator sans a chairman at the top.

The insurance industry has come out relatively unscathed from Covid, according to industry experts. And, with the pandemic giving a huge boost to awareness around insurance, it is, arguably, an inflection point for India’s insurance sector, they believe. India remains one of the most underpenetrated markets for insurance globally.

Amid all this, the new chairman’s task is cut out. Experts are of the opinion that Panda’s priority would be to chart out a long-term roadmap through which India’s insurance penetration can be improved substantially.

Twenty years after India’s insurance sector was opened up, unshackling the control of state-owned companies, as many as 50 private players have set up shop. But India’s insurance penetration needle has moved little. The overall insurance penetration has increased from 2.71 per cent in 2001-02 to just 4.20 per cent as of 2020-21. Life insurance penetr­ation has increased from 2.15 per cent to 3.2 per cent during the period, while non-life insurance penetration has moved up by just 44 basis points to stand at 1 per cent as of 2020-21.

“The general insurance penetration is very low. I think creating awareness and ensuring that people are well protected should be the biggest focus area. India needs protection through insurance for the organised uplift of the country,” said Rakesh Jain, CEO, Reliance General Insurance.

“Insurance penetration levels in India remain low and, in the post-pandemic world, there is a need for Irdai to pivot its attention to develo­pment versus regulation,” according to Sandeep Ghosh, former financial services consulting leader at EY.

Besides shallow penetration, the insurance industry has been complaining about the high GST rate (18 per cent) for premia. While there have been several calls from the industry to the government for a relook at GST on premia, there has not been much development at this front.

Further, there is a need for a regulator for hospitals, according to general insurers. They allege that hospitals have increased their rates exorbitantly since the pandemic, forcing insurers to foot exorbitant bills. Recently, T L Alamelu, member-non-life, Irdai, raised the issue and said in the absence of any regulator for hospitals, the insurance regulator may be asked to perform the role. “There is an urgent requirement for a regulator of hospitals, in the absence of which health costs are shooting up recklessly. This, in turn, is going to make insurance very expensive,” Jain said.

Also, the failing health of the three public sector general insurance companies requires urgent attention, industry experts said. “The three PSU general insurance companies are bleeding. Fresh capital infusion is required,” said Nilesh Sathe, former member, Irdai.

There is also a need to engage with the industry regularly to understand its pain points. “Now since Covid is under control, the new chairman should personally meet industry leaders and take their suggestions to take the insurance industry to a higher level”, Sathe said.

Also, there have been calls from life insurers that the premia charged for Pradhan Mantri Jeevan Jyoti Bima Yojana should be looked at. “The rates need to be increased because insurance companies are bleeding,” said a private life insurance executive.