Will nudge insurers to go public: IRDAI Chairman Subhash Khuntia

It may never be mandatory, but the insurance regulator will surely nudge insurers to go public. On this topic, Insurance Regulatory and Development Authority of India (IRDAI) Chairman Subhash Khuntia said there are many benefits.

"Any company that goes public will lead to better corporate governance and better disclosures. Some firms are too small and they need to grow a little more. Ideally in 10 years time, insurance companies should come to a critical size and should be sustainable. But that has unfortunately not happened for several companies," he said.

Khuntia added that because of the economic situation, companies were conscious as far as listing was concerned. "Now I would like to ask other companies who have attained a critical size to go for listing," Khuntia said on the sidelines of the Global Conference of Actuaries. Among the insurers, Life Insurance Corporation of India is the next big candidate for listing. The government has announced a divestment in LIC through an initial public offering. IRDAI has not yet received an official proposal from LIC.

An earlier IRDAI proposal had talked about mandatory listing of insurance companies after completion of 10 years of operations. However, this was not implemented after opposition from the sector players.

On pricing

Khuntia also pointed that the insurance industry should be sustainable. He said that insurers should neither be unduly profit making or loss making. He added that while companies rely on investment income, this may not sustainable.

"There should not be underwriting loss. This should be done not just through a price increase but through expenditure control and product design efficiency," he said. However, Khuntia said that as a regulator they would not intervene in individual pricing decisions of the company but will point out any errors.

"We will ask companies for an explanation. It is an open market and we insurers to compete. We don’st want to regulate price since this is not correct in a deregulated economy," he added.

Source: Money Control