Business Daily from THE HINDU group of publications
Saturday, Sep 19, 2009
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Business Daily from THE HINDU group of publications Saturday, Sep 19, 2009 ePaper | Mobile/PDA Version | Audio | Blogs |
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Money & Banking
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Regulatory Bodies & Rulings IRDA chief sees deficiency in bancassurance model
Top honchos: (from right) Mr T.S. Vijayan, Chairman, LIC; Mr J. Hari Narayan, Chairman, Insurance Regulatory and Development Authority; and Mr V. Vaidyanathan, MD and CEO, ICICI Prudential Life Insurance, at a summit in Mumbai on Friday. Our Bureau Mumbai, Sept. 18 The Insurance Regulatory and Development Authority of India (IRDA) has expressed concern over the performance of banks with regard to claims settlement. Highlighting the deficiency in the bancassurance model, Mr J. Hari Narayan, Chairman, IRDA, said around 80 per cent of the claims that are filed are done with the help of agents. Weak model“Bancassurance model is weak when it comes to claims settlement,” he said, while addressing the CII Insurance summit. Under the bancassurance model, though banks are efficient in handling credit insurance related claims, their performance is poor when it comes to settlement of personal lines products, he said. Allaying fears about the losses incurred by insurance companies, Mr Hari Narayan said “it is not a serious issue.” He also expressed concern over the lack of actuarial capability in the general insurance space. Underwriting lossIn the non-life insurance space, underwriting losses are increasing due to the competitive pressure after detariffing. However, it is in line with the experience in other countries post detariffing, he said. The IRDA chief observed that the performance of group products was much worse than that of individual products. High expense ratioPointing out that the expense ratio of Indian life insurers at 32-34 per cent was higher than the global players, Mr Hari Narayan attributed this to smaller ticket size of the policies. Globally, expense ratio of companies is 10-12 per cent lower compared to the Indian companies. The rate of growth of non-commission expenses was higher than the life insurers’ first year premium growth and it is a matter of concern, he said. Data sharingSpeaking about the importance of data exchange and sharing, the IRDA Chairman said there was no collaboration between the life and general insurance councils. In segments such as motor and health, data is not exchanged. It is an area of concern and work needs to be done. On the Swarup Committee report on minimum common standards for financial advisers and financial education, Mr Hari Narayan said the consultative paper’s suggestion about replacing the system of commission with a system of fees is an area of concern. On the committee’s proposal on common minimum entry barrier for financial advisors, he said that the clause will reduce the total number of people who will be eligible to become agents. This will impact the reach of the insurance industry, he said. IRDA forms panel to review bancassurance model LIC, PNB to enter into bancassurance agreement More Stories on : Regulatory Bodies & Rulings | Life Insurance
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