Insurance companies will have to make provisions for their exposure to the crippled infra lender IL&FS, industry regulator Irdai said on Thursday.
The IL&FS group with a debt of over Rs 94,000 crore, has been defaulting on its financial obligations since August and has also borrowed from insurance companies, even though the exact exposure of the industry is not immediately known.
Exposure to IL&FS cannot be written off; they will have to make provisions, Irdai chief Subhash Chandra Khuntia told reporters on the sidelines of an event organised by the Insurance Brokers Association without offering any specifics.
Khuntia also went public with the watchdog's concerns on the motor insurance service providers, wherein the quantum of commissions given by insurers is higher than the one set by the regulator.
Whenever it is coming to our notice, we are taking action. We have also done some focused inspection of some of the service providers, we are watching the market very carefully for some violations, he said.
Replying to a question, Khuntia said the regulator is speaking with the GST Council to lower tax on property insurance in vulnerable areas.
In the speech, he asked the insurance industry intermediaries to ensure that their conduct is ethical and pitched for self-regulation in this aspect.
He said mis-selling continues to be rampant in the industry and also called for a shift in practices to ensure that claims get settled quickly and more time is taken for underwriting and selling.
Khuntia said cyber-security insurance will be a big opportunity going forward and asked the industry to hone their skills on underwriting and claim settlement, saying this is a niche area which needs specialisation.
He said the position of a broker is very crucial as he/she has to take care of both the needs of the customers as well as that of the company.
It only gets complicated because the broker is paid by the insurance company, he said, underlining that a customers position should also be considered important.