The Hindu Business Line : Cheaper distribution channels needed: IRDA chief

(From right) Mr S. B. Mathur, Chairman, Life Insurance Corporation of India; Mr Anuroop Tony Singh, CEO, Max New York Life; Mr C.S. Rao, Chairman, IRDA; and Mr Edgar P. Balbin, Senior Manager, Bearing Point; at the international conference on `Regulatory best practices and emerging trends in life insurance' held in Hyderabad on Thursday. - - A. Roy Chowdhury

Hyderabad , Sept. 30

THE Insurance Regulatory and Development Authority (IRDA) has stressed the need to achieve a fine balance between conservatism and extreme liberalism of the regulatory framework for the Indian insurance industry. The regulator was also of the view that there should be provisions to make appropriate changes from time to time to meet emerging needs.

Inaugurating the day-long International Conference on `Regulatory Best Practices and Emerging Trends in Life Insurance' organised by the American Chamber of Commerce (AMCHAM) here on Thursday, the IRDA Chairman, Mr C.S. Rao, said the existing regulatory laws do not provide for any flexibility for speedy and effective response to changing circumstances. Since the regulator facilitates the process of transition from the monopolistic market to a competitive economy, its form, functions, and scope cannot be static.

"It is possible that as services are unbundled and competition increases, certain areas presently regulated may at some future date call for no regulation. Secondly, as an economy matures and becomes sophisticated, the approach to regulation may have to change. Ideally, therefore, there should be some provision in the laws or mechanisms to ensure that the scope and nature of regulation is continuously under review," the IRDA Chairman said.

Viewing that the Indian insurance industry relies heavily on the traditional agency distribution channel, Mr Rao suggested the need to develop alternative distribution channels of independent intermediaries, bancassurance, direct marketing, the Internet, and telemarketing - all of which cost less and enable reaching a wider target market.

Stating that the key challenge in providing insurance to low income households is minimising transaction costs, Mr Rao said the insurance cover in the rural areas at present is quite low for both producer and consumer services.

He stressed the need to promote micro-insurance initiatives for achieving increased penetration and spread of insurance in the country.

Echoing similar views, the AMCHAM Chairman, Mr Sunil Mehta, said changing market conditions result in changes in business models and customer requirements and hence the regulations have to keep pace with these changes to ensure that the insurance industry continuously adopts best practices.

Expressing concern over the multiplicity of regulators, Mr Sunil Mehta said while each of these regulators oversees an important part of the financial services spectrum, there should be a formal platform for these regulators to exchange best practices.

He suggested an Institute for Regulatory Development.