Insurance watchdog IRDAI says 'yet to get' proposal from LIC on IPO; announcement made during Budget 2020
FIRSTPOST.
February 18, 2020
Insurance watchdog IRDAI is yet to
get any proposal from life insurance behemoth, LIC on an initial public
offering but feels a listing is better from a governance perspective, chairman
S C Khuntia said on Tuesday.
He
also said that there is nothing for the life insurance industry to worry for
the time being with regard to the government's move on certain income tax
exemptions as the alternative to invest still exists.
Khuntia
also asked insurance companies to "weed out" loss-making products and
concentrate only on the better-paying ones.
On
the IPO of Life Insurance Corporation of India announced in the Budget, he
said, "LIC proposal has not yet come".
"Any
company which goes public, there will be better corporate governance and
better disclosure,” he told reporters on the sidelines of an event of actuaries
here.
On
being asked if LIC's business will need any restructuring before IPO, Khuntia
said that work on the same is being carried out by the government.
He
said it is a good idea for every insurance company to list and the Insurance
Regulation and Development Authority of India (IRDAI) will nudge entities to go
for the same.
It is, however, not making it
mandatory to list because smaller companies are yet to achieve the scale for
going public, Khuntia said, adding that ideally a company should achieve
sufficient scale to list within ten years of its existence.
He
said the practice of annual product review needs to be carried out in full
seriousness by the players and pitched for a weeding out of the loss-making
ones.
"I
would like to encourage companies to weed out products which are not selling
and simply adding to the number, then they will be able to manage those
products well," he said, adding that the plea was made at a meeting with
chief executives recently.
When
pointed out about practices where industry players are compromising on
financials in the health insurance segment while signing on to group schemes,
Khuntia said the Irdai wants players to be sustainable, where they don't create
losses nor do they earn excess profits.
He,
however, said that IRDAI will not intervene on the pricing front but will limit
itself to pointing out concerns to the players and issue notices if necessary.
Khuntia
went public with his disappointment at the low growth levels of the life and
general insurance segments despite the under penetration in India.
General
insurance grew at 14 percent last year as against its potential to grow at
17-18 percent, while the life insurance segment grew only at 10 per cent as
against the 12-13 per cent potential, he said.
Terming
the actuaries as the conscience keepers of the insurance industry, Khuntia
asked the Institute of Actuaries of India to take more efforts to increase the
number, adding that inherent skill sets in mathematics and software make
Indians very amenable to the stream.
He
said India has only 460 actuaries for a population of 1.30 billion, while the
US has 37,000 actuaries despite having less than a third of Indian population.
Khuntia
said only LIC has undertaken efforts on micro-insurance and exhorted others to
fasten up on the same given the needs in India.
Changing
dynamics, including climate change and also aspects like the coronavirus
outbreak, present newer challenges before the industry and the actuaries will
rise up to the same.
Khuntia
said he is also trying to revive the loss prevention efforts like the
now-defunct loss prevention society for general insurance, explaining that a
reduction in losses can bring down premium costs for policyholders and also
make more people embrace insurance.
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