You can't increase no of auditors in name of regulation
February, 03rd 2009
Regulators have assumed centre stage in the wake of the cataclysmic events unfolding in the financial world.
Insurance Regulatory and Development Authority (IRDA) chairman J Hari Narayan in a freewheeling discussion on the steps being taken by IRDA to safeguard policyholders' interests and ensure the orderly growth of the insurance sector in the country. Excerpts:
Is IRDA reviewing the auditor's role in insurance companies in wake of the Satyam scam?
Yes, we are definitely looking at this issue. We are assessing the situation along with ICAI and intend to announce something in the next few months.
The auditors' role is defined by law and hence we cant redefine their responsibility in the insurance sector. But we need to ensure that auditors do a responsible job and give an accurate picture of the insurance companies ' financial position.
Each insurance company has two auditors to conduct a joint audit and an actuary who has access to all information and documents of the company. They attend board meetings and are aware of the company's solvency position and ability to meet the policyholders' obligations.
So, there is no need to increase the number of auditors. Under the pretext of regulation, we can't add to companies costs by asking them to appoint more auditors. This is not the best way to ensure responsible auditing.
Is IRDA reviewing the position of foreign insurance companies in India, given the global downturn which has affected financial giants globally?
We are looking at these foreign companies on a continuous basis. In fact, we do a review every quarter to ensure their financial soundness. There is nothing to worry as of now. But we need to regulate these companies so as to ensure that policyholder's money is not at risk.
General insurers are experiencing balance sheet pressures due to underwriting losses. Can we expect some regulatory intervention?
IRDA is concerned about the financial position of non-life companies in the country. Our mandate is to ensure that policyholders get sound insurance cover from financially strong companies. This is our prime area of focus. We are having internal discussions and will soon unveil some strategies to deal with the situation.
When will you issue guidelines on mergers and acquisitions for the insurance industry?
We will lay down the guidelines in three months time. The year 2009 provides a great opportunity for mergers and acquisitions. The consolidation phase is set to begin.
Have general insurance companies filed for add-on covers, with detarrification (free pricing) coming into effect from January this year?
Yes. The non-life companies have filed for add-ons. We are looking at the proposals and these covers should be launched in a month. They will be comprehensive and designed as per customer requirements.
What will be the impact of solvency relaxation on life companies?
The average solvency of insurance companies, which was about 190%, has been reduced to around 175%. We have thus brought it in line with other developed economies.
Is IRDA likely to take action against misselling of insurance?
We want to put the brakes on misselling. We are in discussions with the ombudsman and have also set up working groups to look into this issue. We aim to protect existing and prospective policy holders against misselling, besides educating customers on the existence of ombudsmen as a grievance redressal medium.