The insurance regulator’s comments come in the wake of the government’s announcement that it would list LIC in the current fiscal.
The insurance watchdog also expressed concern over the underwriting losses in the general insurance industry and said that surviving on investment income is not an option as falling interest rates could wipe out this source of income as has happened in other countries.
The regulator’s statement comes after GIC Re declared a Rs 1,557-crore net loss for the quarter ended December, bringing its solvency margin close to the minimum statutory level of 1.5%.
“We want companies to write sustainable business. Underwriting losses mean that companies have to make up for the losses from elsewhere,” said Khuntia. He said that while investment was one such source, it cannot be depended upon as experiences in other markets have shown that falling interest rates can wipe out investment income.
Speaking at the 21st Global Conference of Actuaries in Mumbai, Khuntia said that while listing of non-life companies would improve corporate governance, there would not be any compulsion to do so. “Earlier, it was expected that companies would list in 10 years. But because there are many firms that are smaller and will need more time to grow, it (listing) should probably be done in phases,” said Khuntia.
Delivering his speech at the conference, Khuntia said that he would like to reactivate the Loss Prevention Association of India, which could enable the industry to bring down claims by encouraging insurers to take preventive measures.
In the previous month, Khuntia had warned the non-life companies against doing business at unsustainable prices saying that he did not want the industry to go the way of the airline or telecom industry. On Tuesday, he said that while companies were underwriting losses, the Irdai would not go back to prescribing rates like it did in the tariff era.
“We will not intervene in the pricing because that is not correct in a deregulated economy. But if the pricing is not right when the products are submitted to us, we will point it out to them,” said Khuntia.
Earlier speaking at the same event, ICICI Lombard General Insurance MD & CEO Bhargav Dasgupta said that in the last decade, the non-life industry grew at a compounded annual growth rate (CAGR) of 17% to Rs 1.7 lakh crore, while the profits shrunk to Rs 2,713 crore from Rs 2,863 crore. He attributed it to a lack of discipline in pricing.