INSURANCE
IRDAI chairman cautions insurers against predatory pricing
Jan-20-2020

Insurance Regulatory and Development Authority of India (IRDAI) chairman, Subhash Chandra Khuntia has cautioned insurers against indulging in predatory pricing, saying it is not a sustainable model while citing examples of airline and telecom sectors. Highlighting that the insurance industry is different from other business, he said if an insurer fails, it has bearing on customers as well.  He said ‘I would like to give a word of caution. Though your (insurance brokers) share is very high in group health insurance, the loss ratio in group health insurance is also very high. Probably, it is not very sustainable at present.’

He mentioned ‘So the insurance companies, intermediaries and policyholders need to unite to create a sustainable atmosphere. In other industries if there is unfair competition, the industry suffers but the clientele don't suffer. While this has happened in airlines and telecom industries but we cannot afford that kind of a situation in the insurance industry because insurance is an industry for protection.’ He added ‘So if the industry suffers, then clientele also suffers. And as a regulator we would not like that to happen. One should not overcharge and also not undercharge. There is need to create efficiencies so that to bring down premium and minimise the risk.’

To a query on LIC stake reduction roadmap for IDBI Bank, chairman said IRDAI has reminded LIC and they are yet to come forward with it. He, however, expressed hope that it will be done quickly. IRDAI stipulates that insurers are allowed to hold only up to 15% stake in any listed entity. But LIC, with a special dispensation from IRDAI, holds more than the limit in some state-run banks. Besides, the RBI permits a ceiling of 15% for promoter stake in a private sector bank. In June 2018, IRDAI permitted LIC to acquire up to 51% stake in debt-ridden IDBI Bank.

Talking about raising foreign investment in insurance sector from the current 49%, he said IRDAI had sought opinions of stakeholders on raising foreign holding to 74% and comments received have been forwarded to the government. He said ‘Now according to the Insurance Act, 49% is the maximum limit for foreign direct investment. If it goes to 74% naturally the Act has to be amended.’ However, he was non-committal on ownership and control. No decision has been taken, he added.

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