Page 33 - Insurance Times May 2022

The market has evolved with each of these legislations. and getting an approval is kept to a minimum of 30 days (file
Insurance is a long- term business and it takes a while for the and use period) since objections from the regulatory angle
market to mature and support the economic growth of the would be preempted. As an alternative the MDAA could apply
country. But can the Indian market wait for another two for approval from the IRDA and offer an approved product
decades for development of essential support agencies to for insurers to launch quickly.
take place? What does the market require to aid companies
in a competitive, regulated and open market environment? Companies' ability to respond suitably to the dynamics of the
market, meeting regulatory, statutory and legal requirements
The market today is getting fragmented with the entry of could be possible with the least turnaround time. This would
new insurance providers. As far as the private insurers are be the base product. Companies using this service could of
concerned, at this stage their premium turnover is too small course modify the 'vanilla' product to suit their company
to be taken as base for actuarial exercise. The Public sector specific requirements. This being a purely statistical exercise
companies have a wealth of legacy data, which lies in various a large population size coupled with detailed data means
dockets in India. Collecting and collating them for meaningful better predictions. Predictions based on market data are a
analyses at the time of detariffing motor and other products lot more accurate than they it would be if based on data of
is not an impossible task but is extremely time consuming, a single company.
difficult and expensive. The question is who will foot the bell
for this initiative? In a developing market like India it is all the more true,
especially for the new entrants who together have a market
What is the way out for India? A possible road map for India share of around 10 per cent. Besides, information for a
to move to a market experience based rating is to begin particular line of business, which is new to the company, can
aggregating market data immediately. A market aggregator be approached more confidently, armed with accurate market
collects and aggregates detailed data from all the insurance experience. This is true even in a large market like the US,
companies and offers consolidated data back to the where most insurance companies use the products and
companies. This helps in better pricing, improved market services provided by the market aggregator, Insurance
segmentation, optimum reserve creation for unexpired risks Services Office (ISO).
and assists in product design.
The Insurance Services Office (ISO), a thirty two year old
A market aggregator collects policy and claims information organization in the US, is a popular provider of state approved
from all the insurance companies in the market and property and casualty products and services. They hire fellows
consolidates the data. This is a highly specialized job. With and associates from the Casualty Actuarial Society (CAS),
the huge database at their disposal Market Data Aggregating Certified Property & Casualty Underwriters (CPCU) as well as
Agencies (MDAA) can design policy coverage, analyze trends certified professionals from Insurance Data Management
and provide other data related services. The market gets to Association (IDMA). They are also supported by legal,
use consistent and sufficiently large data. This makes pricing government and regulatory experts who analyze the effects
a lot more accurate and enables insurers to offer preferential of changing legislations and regulations on the business.
ratings. Besides pure actuarial data an MDAA could offer
policy wordings, new product designs, possible rating ISO provides standardized wordings and coverage based on
structures and underwriting rules. years of market data. This can either be used as is or
companies can modify them to suit their own requirements.
This saves the industry's valuable resources and time. Everyone, insurers, intermediaries and clients, benefit from
Individual companies would have to duplicate the task at an ISO with reduced costs, prevent fraud and support
incremental price. Experts in the statistical, actuarial and competition by providing comparative information to aid
technology fields can be hired for the market as a whole. The decision-making.
best of talents can be afforded because of shared costs.
What can IRDA do? IRDA has two major roles to play,
MDAAs help not only the insurers and regulators but also the development of the insurance market and protection of
customers who would have the confidence that they are policyholders' interest. IRDA can facilitate the setting up of
priced at an accurate rate based on past claim history and an MDAA. Regulations require that certain data be submitted
risk profile. The lag time between filing products with the IRDA to the Authority. But a lot more detailed data is required to

The Insurance Times, May 2022 33