Several hits, few misses in Debasish Panda's 3-year tenure as Irdai chief

Debasish Panda took over as chairman of the Insurance Regulatory and Development Authority of India (Irdai) during one of the most turbulent periods for the insurance industry — in the middle of the pandemic — resulting in surging health and life-insurance claims.

 

Over the next three years at the helm, Panda introduced major reforms aimed at enhancing customer convenience and improving insurance penetration, causing some disruption for industry players. On Monday, the central government put out an advertisement inviting applications for the position of Irdai chairperson. Panda’s tenure ends on March 13.

 

Among his major initiatives was a clarion call to achieve “Insurance for All” by 2047, whereby every citizen would have life, health, and property insurance cover and every enterprise would have insurance solutions. The push behind this was the fact that almost 25 years after the sector was liberalised, insurance penetration has not happened much.

 

The latest data suggests life-insurance penetration in 2023 was at 2.8 per cent and non-life insurance penetration at just 1 per cent.

 

The world average for insurance penetration is 7 per cent.

 

Under Panda, Irdai worked on removing entry barriers for floating an insurance company, and called upon every class of investors or funds — private equity, venture capitalists, institutional investors, family offices, etc — to invest in the sector. Panda, through his speeches, repeatedly called on large Indian conglomerates and business groups to enter the field. These efforts have shown results. Six players entered the industry under Panda’s tenure, marking the first additions in the life segment in over a decade and the first in the general and health insurance segments in nearly five years.

 

Further, for the first time, the regulator assigned aspirational targets for insurers for a period of five years to double penetration in the country.

 

For them to move towards the target, the regulator took a series of steps to reduce regulatory as well as compliance burden. For example, the regulator extended the “use & file” procedure for all insurance segments so that the industry could respond to emerging market needs in terms of products.

 

Additionally, Irdai under Panda moved to principle-based regulation from rule-based regulation.

 

Industry insiders say perhaps one of the most important reforms that Panda brought in was the “expenses of management” (EoM) threshold for insurance companies. This is aimed at reducing the cost structure so that the consumer can benefit in terms of lower premiums. Previously, there were caps on the amount of commission the companies could pay their distributors, depending on the lines of business.

 

Panda’s reform initiatives were aimed at customer convenience, according to experts. This was evident from the revised surrender-value norms Irdai brought in last year, despite opposition from the industry. The norms aimed at increasing the payout a policyholder gets when the person surrenders the policy.

 

“Panda’s tenure was one of the most active periods for the insurance sector, bringing major reforms like the EoM norms, the ‘use and file’ system for insurance companies, and changes to surrender charges. While some of them have been welcomed by the industry, it remains to be seen how others will be absorbed,” said the chief executive officer (CEO) of a private life insurer.

 

“Panda has taken a lot of initiatives. He tried to bring the norms on a par with international standards, while improving the financial stability of companies. A lot of things changed after the pandemic and he introduced regulatory changes. The industry was a bit rattled initially trying to keep pace with these changes, but it will get used to it eventually,” said the CEO of a private general insurer.

 

Panda has been an advocate of increasing foreign direct investment (FDI) in the sector to 100 per cent so that foreign insurers do not have to look for an Indian partner to set up shop. In this year’s Budget, the central government increased the FDI limit to 100 per cent, which is expected to bring in substantial amounts of foreign capital into the  sector. There are some unfinished businesses. The first among them is the launch of Bima Trinity — Bima Sugam, Bima Vistaar, and Bima Vahak — his most ambitious project to create an Amazon-like digital platform for buying, selling, and servicing insurance policies. The idea, initially proposed by Panda in 2022, has seen several projected launch dates, including January 2023, June 2024, August 2024, April 2025, and, most recently, mid-2025.

 

Among other initiatives that have not seen the light of day are a risk-based capital framework, risk-based supervision framework, and International Financial Reporting Standards. Additionally, despite Panda pushing players in the industry who are of a certain vintage and size to go for public listing, very few of the legacy companies have done so. Recently, Panda asked several of them to prepare a road map for listing.

 

Further, the insurance amendments proposed by the regulator, especially the idea of a composite licence, which would allow insurance companies to do all lines of business including life, health, and general, has been delayed.

 

Reforms by Irdai under Panda 

> Insurance for all by 2047

> Ease of entry of new players

> Use & File system for filing products

> Expense of Management norms for companies

 

Unfinished business

  > Launch of Bima Trinity – Bima Sugam, Bima Vahaak, and Bima Vistar

> Implementation of risk-based capital framework, risk-based supervisory framework, IFRS