The Insurance Regulatory and Development Authority of India (IRDAI) will relook at regulations, capital requirements and introduce new products to widen the penetration and give insurers more flexibility in their operations, chairman Debashish Panda said.
Working groups will be formed to relook at current regulations with an aim to lighten them and give more flexibility for companies to launch new product, Panda who took charge of the IRDAI less than a month ago said. He spoke to the media after interacting with industry leaders in Mumbai over the last few days.
“Broadly we will have a principle based regulations rather than rule based regulations. We will fix the broad framework and then give companies the flexibility to work within that. The whole aim is to have lighter regulations and if there are over a 100 regulations we can bring it down to 10 to 15. The insurance industry has matured now and they understand the rules of the game and the market,” Panda who took over as IRDAI chairman for a three year term last month said.
The IRDAI plans to form three to four different working groups to relook at regulations to remove those that are not required, identify ones that need modification and those that are completely outdated. “We will also have IRDA officials besides industry people to deliberate and discuss on the changes so that there is a consultative process right from inception. We also want to propose an amendment to the Insurance Act to reduce capital requirements which will allow small niche players to come into the market,” Panda said.
Currently, the IRDA Act 1999 specifies that all insurance companies have to have a capital base of Rs 100 crore, which Panda said was disincentivising small technology driven mciro insurance companies which can provide services in the hinterland and widen the scope for insurance.
“Just like there are small finance banks and micro finance institutions in the banking sector we need technology led insurance companies offering standard products with defined benefits to
small traders, shopkeepers, farmers or micro enterprises at a reasonable premium.
At Rs 100 crore capital base these niche players cannot come in so we need to open the door for them and move to a capital requirement depending on the size and operations of companies,” Panda who served as secretary, department of financial Services, before he superannuated in January this year said.