Mumbai, Nov 22 (IANS) An insurance regulator who is on a learning curve and life insurance chief executives who do not understand the basic tenets of the business are some of the challenges faced by the Indian life insurance industry, according to experts here Monday.
‘The Indian insurance regulator (Insurance Regulatory and Development Authority – IRDA) is in a learning curve. Frequent knee-jerk reactions have put the industry in a state of dilemma,’ said G.N. Bajpai, former chairman of Securities and Exchange Board of India (SEBI) and Life Insurance Corporation of India (LIC).
He was referring to the game-changing regulations governing the unit linked insurance policies (ULIP), banning of universal life insurance, brought out by IRDA recently.
Delivering the keynote address at the two-day seminar on Current Issues in Life Assurance organised by the Institute of Actuaries of India (IAI) here, Bajpai said: ‘Life insurance chief executives should understand that the business is a marathon race.’
Anybody trying to speed up the pace will be creating challenges not only for his own company but also for the industry as a whole, Bajpai remarked.
Referring to the challenges facing the life insurance sector, he said the challenges are both external and internal.
‘The business environment is a major issue. In India financial literacy is low. So life insurance policy is a push product,’ he said.
He said the economic stability of the nation is a major factor that would affect the life insurance business.
A growing economy has inflation as an attended risk, which in turn would affect the life insurer’s business as the surplus available with the households for savings will come down, he said.
‘Inflation in India is a structural issue and not just a cyclical one. The government is not dealing with inflation. Similarly, the government is not using the funds raised from disinvestment for infrastructure funding,’ Bajpai added.
According to him, life insurance product designers should understand the basic philosophical undertone of Indian customers in different regions as each Indian state is a different market on its own unlike other countries which can be termed as a single market.
Earlier, inaugurating the seminar, IAI president Liyaquat Khan said: ‘Ten years after opening up the life insurance industry the sector is still in a state of unease.’
He said the actuaries and actuarial skills are the key drivers for the industry.
‘Many CEOs of life insurance companies are not from the insurance industry and who do not understand the basic dynamics of life insurance business,’ Khan said.
Adding, he said: ‘The depth of knowledge in IRDA on life insurance needs improvement.’