Irda Chief Sees Tough Times Ahead For General Insurers

Insurance Regulatory and Development Authority chairman N Rangachary predicted tough times ahead for general insurers which could mean roping in private players.

According to him the state-owned general insurers would be required to rope in private partners to become more competitive ion the business. "Public sector companies have grown in the belief that business will not go away from them. But many will have to restructure, more in case of general insurance where the pinch will be felt more. In ten years there has to be a distinctive change in the manner in which they function," the IRDA chairman said at the sixth insurance summit organised by CII.

He said that the next ten years would witness tremendous upsurge in awareness of consumers which would put pressure on insurers to perform. "they have to respond in quick time Rangachary said.

He also said that another change that would come about would be the change from a distinction between life and non life business to one differentiated by the tenure of policies. One business would be that for the short term and another for the long term, he added. This he said would also mean a change in the regulatory framework. "Depending on which side you fall in there will be prudential regulations," he added.

A distinction based on tenure of policies would also result in a convergence between life and non life businesses. "Perhaps, the restriction on establishment of composite business would have to be looked into," the IRDA chief said, adding: "The regulator has to change the approach from one of guiding the industry to look more on prudential guidelines."

In a decade's time, he said, there would be pressure to disband tariff and leave it to companies which would fix premiums on the basis of demand. Rangachary did not also rule out the possibility of a super regulator for the financial sector coming about.

He, however, had a word of caution. "I am only fantasising." Whether it would happen or not, only time will tell.