Insurance Regulatory and Development Authority of India Chairman J. Hari Narayan warned the industry against engaging in unhealthy competition post de-tariffing.
“This was driving down premium incomes raising fears of the health of the insurance industry,'' he said while inaugurating the 8 summit of the Insurance Brokers Association of India. “The broking industry too would get affected if this goes on,” he remarked.
Pointing that the onus squarely lies with the insurance companies, Mr. Narayan said there was no reason why everybody should be competing on prices at a time when the market had grown rapidly over the last few years. “People compete on prices when demand is falling not when there is a good market,'' he said, warning that a regulatory view might have to be taken. He mentioned in this regard that in countries such as Germany and Korea, where a similar trend was noticed, regulation of tariffs was reintroduced with a floor being fixed for tariffs.
“If this trend is not checked, then there will be serious financial trouble for the insurance companies,'' he said. Tariffs should be fixed in a financially responsible manner according to the IRDA chief. He later told reporters that with all but one insurance company making underwriting losses, the regulator was closely monitoring the situation. “Companies should be bound by under-writing principles instead of fighting for top-line alone,'' he said.
To a question on whether the Third Party Administrators (TPAs) were making a mockery of the entire system, Mr. Narayan said the regulator was not in favour of abolishing the system but was keen to reform and restructure the system of settling claims in a more equitable manner. In this context, he mentioned that while some had outsourced their clam settlement processes to TPAs, some are taking it back now as TPAs are not found to be deficient in service. He also said the regulator favoured dematerialising insurance products.
