Regulatory Body For Sector Mooted

The opening up of the insurance sector has necessitated a strong regulatory body to prevent repetition of the scams which surfaced in the banking and financial sector in the post-liberalised regime.

A strong regulatory authority was a precursor to the opening up of the insurance industry, said professor Amiya Bagchi, director, Centre for Studies in Social Sciences, while inaugurating a day-long seminar on insurance and consumer interest in Calcutta yesterday. A proper mix of competition and regulation can prevent a repeat of the past history of misbehaviour of private insurers, Bagchi said.

The insurance sector, according to Bagchi, cannot be a perfectly competitive market with unlimited players like a market for potatoes. This calls for regulations to stimulate competition among the players.

Inadequate regulations would inevitably lead to a repetition of the scams connected to the banking sector and the capital market that had occurred previously. Bagchi also highlighted the problem of unethical insurance claims and the refusal of insurance companies to entertain certain clients because of past experience.

A strong regulatory framework would address such problems and control opportunistic behaviour of new entrants and curb the monopolistic tendencies of the nationalised insurers, he said.

Bagchi suggested the introduction of variable rates of insurance premium based on the life expectancy in the different states. As an example he cited the high life expectancy in Kerala which stood at 69 years compared with 53 years in Madhya Pradesh. The national average stood at 60 years. Insurers moving from states having lower life expectancy to higher life expectancy suffer due to the fixed premium rates.