For the first time in two decades a private sector executive competes for the post of chairman, IRDAI. Will the belief of Prime Minister Modi in lateral placement for top public sector posts, help?
The Insurance Regulatory and Development Authority of India (IRDAI) is now topless. The powerful IAS would be obviously be lobbying to position one of its retiring members for the job. Of the five chairmen so far, three belonged to the IAS. The first one N Rangachary (NR) was from the Indian Revenue Service. He gave content and initial momentum to the opening up of the insurance sector in 2000. Remember, at that point of time both life insurance and general insurance were fully in the public sector? NR assembled a rich team of motivated professionals and laid the foundation for the growth of the insurance sector. Today there are 24 life insurance companies and 34 non-life insurance companies including re-insurers and exclusive health and
agriculture insurance companies.
The zealous IAS seized of the opportunity and held the post for a decade from 2003. T S Vijayan who headed LIC took charge in 2013 and was succeeded by SC Khuntia IAS who retired recently.
The rise and rise of LIC
Life insurance Corporation of India (LIC) was established in September 1956 when the Parliament passed the Life Insurance of India Act nationalise the life insurance business. Over 245 insurance companies and provident societies were merged to create the state-owned LIC. Over time it evolved into the top government enterprise and unti 2000 was the only public sector life insurance company in India. For the year ended March 2021, the market share of LIC in the sector’s total insurance premium was approximately 66 per cent.
The flourish of LIC also enabled it to build huge reserves which were invested in a variety of sectors, notably infrastructure and corporates. The government plans to come out with an initial public offer (IPO) offloading a portion of the equity of LIC at a handsome premium.
GI companies continue to bleed…
The general insurance sector, in contrast, is bedeviled by unhealthy competition and mounting losses. All the four public sector general insurance companies have been recording hefty losses on the insurance business. The huge surpluses earned through investments over decades have been helping these to still show profits. Even in regard to the private general insurance companies only 3 out of 21 had recorded profits for 2020-21 (see detailed report in IE July issue).
Though the government permitted foreign investments up to 74 per cent of equity, most companies have not attracted FDI even up to the earlier permitted 49 per cent.
It is not, therefore, easy for the incoming chairman of IRDAI to work on improving the spread of insurance, both life and general. For the first time in two decades there is interest on the part of a private sector executive to compete for the post of chairman, IRDAI. S S Gopalaratnam, who headed with distinction Cholamandalam MS General Insurance Company of the Murugappa Group, is pitching for the post. He brings with him good credentials with over three decades of experience in heading various divisions in the Murugappa group.
With the belief of Prime Minister Modi for lateral placement for top public sector posts, it is interesting to look for a change.
After the excellent initial start, IRDAI seemed to have gotten stuck with a bureaucratic culture. There has been an over-emphasis on regulation and less on development – look at the increasing restrictions like ceilings on brokerage commissions. The spread of both life and general insurance is low in comparison with even several developing countries. There is urgent need to expand this coverage – IRDAI should focus in this. – SV
