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IRDA to pare solvency norms for new entrants in health insurance

The Insurance Regulatory and Development Authority, or IRDA, indicated that solvency norms in health insurance might be relaxed to encourage new entrants.

IRDA chairman N Rangachary said that a final decision will be taken after insurance advisory committee concludes deliberations in its first meeting starting on June 19. He was speaking at a seminar on "Insurance - The new horizon' organised by the Bengal Chamber of Commerce in Calcutta on Saturday.

Granting concessions to new entrants in health insurance will be a part of deliberations in the coming three-day meeting of advisory committee, he said.

Rangachary said, under section 64 v(a) of the Insurance Act, certain norms related to solvency of new entrants needs to be fulfilled, but in respect of health we have a facility to show some concessions. Section provides for maximum limits to be fixed and we have to decide the actual percentage.

Commenting on the criteria to be followed for allowing new entrants, including foreigners, in insurance sector, Rangachary said, the entire philosophy is to encourage only long-term players dictated by a philosophy to nurture the market.

Those opting for a short-term returns will not find place as there is a necessity to establish a long term profile, he said adding, "we have requested the government for setting up and introducing long term papers so that the industry is not starved of fresh investment."

He reiterated that new entrants will have to keep rural markets in their minds where development is lacking today. An equal portion of life insurance collection should be from the rural section and we are in the process of discharging their obligation and how new entrants can do it.

The IRDA chairman further said a compulsory rule on accounting would be implemented, both by the new and the existing players. However, there is a provision for existing players to switch to new rules within a time frame (period of adjustments to follow the new pattern), he said and hoped they (existing players) will not ask for long time schedule.

Regarding tariff fixation, Rangachary said that there cannot be two sets of tariffs as it will defeat the very purpose of opening up the sector and competition. He, however, said once the system is stabilised, say in four to five years, we may think about that.

Tariff for both the new and old players will be same. What will be difference is the quality of service, he said and hoped that old players will perform better than today.

UNI

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