Former Irdai chairman asks insurers to concentrate on prevention of risk

Insurers need to focus not only on insuring risks, but also on prevention of risks so that the policyholders derive benefits from not just settlement of claims, but also from prevention of loss, said Subhash Chandra Khuntia,  who retired as the  chairman of Insurance Regulatory and Development Authority of India (Irdai) last week. 

Khuntia's term as Irdai chairman ended on May 6. He held the office of Irdai chairman for three years, from May 2018 to May 2021. Irdai has started the process of finding a successor to Khuntia, inviting applications for the post of chairperson. A circular issued by Irdai said the applicant, who wishes to apply for the Irdai chairman’s post, must have knowledge or experience in life insurance, general insurance, actuarial science, finance, economics, law, accountancy, and administration. And, the consolidated pay and allowances of the chairperson will be Rs 4.50 lakh per month, without the facility of a house and car.

 

“This will generate greater trust between the insurer and the policyholder and both would stand to benefit in the long run," he said.

In his final letter to the heads of the insurance companies, uploaded on the website of Irdai, Khuntia said that despite challenges faced by the economy due to the coronavirus (Covid-19) pandemic, the Indian insurance industry had been able to grow at a healthy pace of 9.2 per cent in 2020-21 with the life insurance industry growing at 11.2 per cent.
 

In the first two quarters after the onset of the Covid-19 pandemic, the insurance industry suffered negative growth. But, it bounced back as soon as the economy opened up post the lockdown. The life insurance sector grew by 11.2 per cent during 2020-21, as against 11.7 per cent last year. Despite the severe slump in motor and crop segments, the non-life sector grew by 5.2 per cent, as against 11.5 per cent last year. The total insurance premium for the year amounted to Rs 8.3 trillion, registering a growth of 9.7 per cent, as against 11.6 per cent last year.

 

In the letter, the Irdai chairman said, “Indian insurance sector is presently on the cusp of a transformation.”

 

There are three main factors in the play: demography of the country with a predominantly young population, that is likely to persist for several years; the potential of high economic growth that would improve affordability; and relatively low level of insurance penetration that provides a huge opportunity for growth.

 

“Indian capability in the IT and IT-enabled services sector will further accentuate the potential growth of the Indian insurance sector," Khuntia said. He also emphasised the fact that cybersecurity risks and risks out of global climate change have to be addressed by insurers.

 

Furthermore, insurers also need to be flexible when it comes to meeting the evolving needs of the consumers and the regulatory sandbox initiative is one such window where they can test their innovative products and services. Also, insurers have to mindful of their distribution of channels as they may need to use newer channels for selling their products.

 

“Insurance inclusiveness is another area that all of us need to concentrate on so as to cater to the rural population, farmers, women, MSME, the poor, and the marginalised. We need to develop cost-effective microinsurance models for the same," Khuntia said.

 

“This journey will be a win-win for all stakeholders, will generate additional employment, provide funds for investment in the economy, particularly in the infrastructure sector, and provide necessary protection to the policyholders," he added.