Page 49 - Banking Finance August 2023

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also into risk-based supervision; the same approach is being The regulator is also exploring how to bring about synergies
followed when it comes to capital for its efficient use. The in the working and operations of Bima Vahak and Bima
risk-based supervision replaces compliance-based Vistaar along with the Bima Sugam digital platform. Bima
supervision. It covers not only operational and financial risks Vahak intends to form a women-centric insurance
of a company but also the larger macroeconomic risks,
distribution channel, involving gram panchayats, self-help
including geopolitical tensions and issues such as climate
groups, anganwadi workers and teachers as distributors.
change that have a bearing on risks.
Bima Vistaar is a social safety net product, targeting
untapped geographies.
Close on the heels of allowing two applicants in the life
insurance space, Irdai has given licence to a general insurer
On the line of the banking industry’s state level bankers’
for the first time since 2017, and is looking at many
committee where one entity plays the role of a lead bank
applications both in life and non-life segments for potential
in a state for ensuring loans to the under-privileged
licences. The life insurance licence was last given in 2011.
segment, Irdai is insisting that every insurance company
must adopt one state; it has also introduced the concept of
There are 25 life insurers and 34 general players, including
lead insurer (a la lead banker). For the first time, the
health insurers, operating in India but when it comes to the
regulator is involving the states as partners for the spread
share of business, a few of them account for a large chunk
of insurance, something which the banking sector has been
of the market. In other words, there is a long tail of the
doing.
industry. How many more of them do we need?
Irdai has adopted a liberal approach and is ready to It has also eased the norms for raising capital. The process
welcome many more entities of different shapes and sizes. has been simplified, the definition of promoter has changed;
In the banking industry, besides the universal banks, we have and private equity funds are now welcome to invest in the
small finance banks, payments banks, regional rural banks, sector. Typically, private equity investors don’t have a long
cooperative banks as well as non-banking financial horizon but, by inserting a lock-in period in the investment
companies. Let hundreds of insurance outfits bloom to cater guidelines, Irdai has prevented their early exit.
to the needs of different segments of society and different
geographies.
Finally, the regulator is also exploring the composite licence
system whereby one company can dabble in both life and
The regulator has already liberalised distribution channels
non-life insurance businesses. Globally, a few countries have
to deepen penetration. Instead of one insurance company
tried this out; fewer have met with success. Theoretically,
engaging a maximum of three banks as distributors for three
it will make life easier for the customers as different products
different insurance segments, it now can have tie-ups with
can be sold from one platform. The companies, too, can
as many as nine banks. Liberalisation for the agent network
leverage capital better by deft allocation. The draft
is awaiting the amendment of the insurance Act.
insurance Bill has this provision.
Irdai is also in the process of launching a revolutionary
Being aware that he is heading the Insurance Regulatory
platform, Bima Sugam, policies. A customer can access all
and “Development” Authority of India, Panda is moving at
insurance products and services at this single window. A fee
a breakneck speed. The banking regulator and the market
will be charged for each transaction — sale and renewal of
regulator don’t have the “development” tag attached to
the policies — to meet the operational expenses.
them.
The broking community should not feel threatened as they
can continue to play the role of an intermediary since the At this moment, the industry has Rs 60-trillion assets under
platform will allow transactions through an “assisted mode”. management. As it swells, India will have a decent corpus
This will, in fact, open up a new market for the insurance of long-term funds to support infrastructure building and the
industry in untapped geographies such as the Northeast. The government’s borrowing programme, easing the burden on
agents can model themselves on banking correspondents. the banking system. (Source: Busisness Standard)

BANKING FINANCE | AUGUST | 2023 | 49