Insurance study for strict norms

Mumbai, May 14: A white paper on private sector participation in the insurance industry has advocated strict entry norms for foreign players...

Mumbai, May 14: A white paper on private sector participation in the insurance industry has advocated strict entry norms for foreign players as in other Asian countries.

8220;Only those foreign players who enjoy good corporate reputations should be allowed entry,8221; according to the study prepared by Bombay Consulting Group BCG for the Bombay Chamber of Commerce amp; Industry8217;s BCCI. Certain key steps suggested before allowing private sector players include a strong regulatory authority and an independent tariff advisory committee to regulate competition as against a free for all8217; which existed in the fifties and which led to nationalisation of the industry.

The BCG study has recommended that the government should provide job assurance to PSU employees in Life Insurance Corporation and General Insurance Corporation, allow VRS to the willing and put a freeze on new recruitment.

According to Raj Nair, chairman, BCG, PSUs can reduce the adverse impact of high employee cost to premium ratio, the paper said.The paper strongly advocates disinvestment of insurance PSUs and removal of unnecessary constraints, multiplicity of underwriting offices, comptroller of auditor general being some of them.

Raj Nair said that domestic life insurance policy premium rates are high as mortality tables are outdated. The paper said that the life insurance product mix today is skewed towards costlier products like endowment and money back mainly because of unprofessional agents who as the sole distribution channel push these products, said the report.

The paper has suggested changes in legislation to allow new distribution channels such as brokers and banks, which are very popular in foreign countries, to enable faster penetration. 8220;In general insurance, new entrants are likely to offer superior product features at prevailing premium rates. The most significant change expected is in the quality of service,8221; Raj Nair said.

The successful introduction of private sector players in pension and health insurance sector ismentioned in support of the proposed opening up of those sectors by the government. 8220;For instance, private health insurance products have already gained a significant share in European countries although publicly financed health care is available,8221; the BCG study said.

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The white paper argues in favour of demonopolising the Indian insurance sector through the basic premise that it is beneficial to the customers and to the economy while putting forth strong recommendations to strengthen and protect the interests of insurance public sector units. The benefits in the white paper include the variety of new products which the new entrants can bring in.