‘As insurance regulator, I have an open mind’

In his first public conversation after taking charge as chairman of the Insurance Regulatory and Development Authority of India (Irdai), Ajay Seth talks to Tamal Bandopadhyay on the impact of reforms in goods and services tax (GST), foreign direct investment (FDI) in insurance, the Bima Sugam initiative, and flexibility in investment norms for insurance companies.

- 

Edited excerpts:

What are your expectations from the industry on GST cuts being passed on to customers?

■ As a regulator, and with this being my first appearance, I would like to state that I have an open mind. Based on data, analysis, and the perspective I have, I reach conclusions. But nothing is done without consultation, discussion, and a consensus. I draw strength from what Parliament has mandated — protect policyholders’ interests and, on the other side of the coin, regulate, promote, and develop insurance in an orderly manner. Orderly development requires building a consensus on any reform.

On goods and services tax (GST), what the government has signalled is that insurance firms have zero GST, and so do food products (processed). The inference I draw here is that the government is putting insurance in the same category as food, which is essential for life.

Now this is an opportunity for the sector to focus on the consumer. Are we content with serving 10 per cent of our population? No. This is a moment where the government has provided maximum possible support.

From the regulator's side, the question is how we can economise our cost. We have to go from a high-cost structure to a moderate-cost structure, with good service.

In life insurance, 20 per cent of the risk pool is the cost of procuring it and managing it. And that too, a significant part of that risk pool is not really the risk pool. It has a lot of savings too. Think of any financial sector that has a cost of savings and the risk pool is 20 per cent. For non-life it is 30 per cent.