How to future-proof Indian insurance architecture

The Indian insurance architecture must partake of principle-based primary legislations, and empowering the regulator with adequate powers to conduct insurance development and supervision through principlebased secondary legislations/regulations, to dynamically respond to market requirements.

- Arun Agarwal

A transformative agenda for Indian Insurance, for the well-articulated vision of “Insurance for All by 2047”, requires the regulatory focus to be firmly on providing Ease of Doing Insurance Business Framework (EoDIBF). This necessitates two things: a) Progressive and proportional regulations, and b) The Insurance Regulatory and “Development” Authority of India (IRDAI), and the other insurance regulators offering Single Window Ownership (for their own collaborative verticals, as also for cross-sectoral support from allied functions).

There seems to be a common “understanding” that more capital is required for deeper penetration. However, various findings suggest that enabling policy actions to become “inclusive, progressive and high performing” sector will mean much less additional capital requirement to affect a paradigm change in the insurance market. The EoDIBF requires a legal, regulatory and institutional framework (LRIF). The Indian insurance architecture must partake of principle-based primary legislations, and empowering the regulator with adequate powers to conduct insurance development and supervision through principle-based secondary legislations/regulations, to dynamically respond to market requirements. The hard coding of the primary laws makes the regulatory management inflexible, and the regulator cannot cater to an ever-evolving market. The Government’s legislative agenda must, therefore, allow all the primary legislations undergo prudential transformation to allow IRDAI the direction, flexibility and accountability to promote development, and effective, globally benchmarked supervision of the insurance industry. In any case, the quintessential character of insurance is ‘global’ as it is based on spreading of risks.