Irda seeks more disclosures

In order to provide greater transparency and enable policyholders to take more informed decisions, the Insurance Regulatory and Development Authority (Irda) is asking insurance companies to disclose solvency margin, claim settlement record and loss ratio on a quarterly basis.

The changes in the disclosure norms, along with the track record on dealing with customer grievances, are proposed to be effective from June this year.

“Claim settlement will give an idea of the number of claims settled and the numbers pending with the insurer, while other figures will provide a picture on an insurer’s underwriting capacity. For policyholders, it is necessary to know the strength of the company he or she is dealing with,” said a senior Irda official. While there will be more disclosures for life and general insurance companies, the nature of data to be made public will be different, the source added.

At present, the insurers disclose the audited annual numbers to the regulator and Irda publishes the data in its annual report.
 

CRACKING THE WHIP

* Changes in the disclosure norms are proposed to be effective from June

* While there will be more disclosures, the nature of data to be made public will be different

* Insurers disclose the audited annual numbers to the regulator and Irda publishes the data in its annual report

* Insurance firms disclose only the new business income on a monthly basis

The insurance companies only disclose the new business income on a monthly basis. Since none of them are listed, flow of information is limited. This has prompted Irda to initiate steps to strengthen the disclosure system as part of a drive to improve corporate governance standards.

According to the Irda guidelines, insurance companies are required to maintain a solvency margin of at least 1.5 per cent. This means that the companies need to have a capital base of Rs 150 if they cover risks worth Rs 100. In India, insurance companies have traditionally been well-capitalised.

Life insurance companies, which are in a long-term business, have maintained a capital adequacy ratio of 2-5 per cent, while general insurers have maintained 1.5-1.7 per cent solvency margin.

The insurers welcomed the Irda move. “Right now, only business figure that is disclosed is premium income and this does not give a holistic picture of the company. The disclosures are good for the industry,” said ICICI Prudential Life Insurance Managing Director and CEO Shikha Sharma.

“Disclosing the customer grievance redressal numbers will force companies to handle the issue better,” added Tata AIG General Insurance Managing Director and CEO Gaurav Garg.

The regulator is also expected to come up with mergers and acquisition guidelines by the end of this month.