Life insurance companies come together to form a self regulatory organisation. By Venkatchari Jagannathan.

The Life Insurance Council has started with a bang. After its stormy first meeting at Mumbai, the council's recommendation to Insurance Regulatory and Development Authority (IRDA) to permit only term insurance cover for keyman insurance policy has been accepted. It may be recalled the policy was being misused to avoid tax and a couple of life insurers were mentioned as offenders.

The meeting also decided to form a market conduct committee to monitory the marketing practices of the players.

However, the council's secretary general S V Mony, terming the first meetingas healthy, said, "The discussions were healthy and the decision was unanimous. Further sub-committees are important for the functioning of any organisation. We will be forming several sub committees to look at various issues. On the whole we want the life insurance council to be the life insurance industry's self regulatory organisation."

Constituted under Section 64A of the Insurance Act 1938 the council will function through an executive committee. "Today, the council is a small organisation. We are in the process of forming the executive council."

According to the Act, the executive committee of the council would assist insurers in setting up standards of conduct and practice, customer service, advise IRDA on controlling insurers' expenses, bring to the IRDA's attention matters relating to any non-complying insurer.

"We are also expected to take over the functions relating to training of agents, approval of agents training institutions." Presently the matters relating to the training institutes for agents and agents training are looked after by IRDA.

The council has also signed an MOU with the Actuarial Society of India (ASI) to form the Mortality and Morbidity Investigation Bureau. The basic objective is to study the recent trends in, and acquiring more data on information on, mortality, morbidity and other specific risk related contingencies in life insurance. A joint venture company will be formed for the purpose.

Mony (67) vice chairman, AMP Sanmar Assurance Company Limited and the former chairman, General Insurance Corporation of India (GIC) will hold this post for two years and he talks about the role that the council would play. Excerpts.

Is the council going to be a lobby body for the life insurers?
The council is certainly not a lobby body but the industry's self regulatory body. In addition the industry needs a forum to act as the voice of life insurers and be its spokesperson to communicate members' position on policy issues to government, legislature, regulatory and the public.

The council will help IRDA to increase the insurance awareness amongst the masses and also build the industry's image through seminars, etc. Not many know that the life insurance industry manages around Rs5,00,000 crore.

The council's vision is to play a significant and complementary role in transforming the domestic life insurance industry into a vibrant, trustworthy and profitable service, ushering the people of India on their journey to prosperity.

The mission is to act as an active forum to aid, advise and assist insurers in maintaining high standards of conduct and service to policyholders.

Will the life insurers pay some percentage of their total premium to raise resources for the council?
As of now the council is a small body. We are in the process of formulating its budget. All the life insurers will share the councils' expenditure equally. The cess will not be a share of the life insurer's premium.

One of the reasons for opening the industry to private participation was to increase the insurance penetration in rural markets. But that has not happened as the private players sell just ULIP particularly in the metros.
During the past one or two year's private players have expanded their distribution network to rural areas. The spread will be faster in the years to come. Incidentally ULIP is a popular product even in smaller towns.

As the industry's self regulating body, what is the council's response to complaints against ULIP?
We have addressed one complaint relating to the keyman insurance policy. A life insurer can issue only term insurance for keyman insurance cover. The other criticism about ULIP is the negligible life cover provided under some schemes. The council will soon draft the norms relating to this and recommend the same to IRDA.

Life insurers are accused of promoting ULIP to pick up big ticket policies reduce additional capital infusion and shift the investment risk to the policyholders while reaping higher percentage of share in the surplus. Your comment.
Even traditional insurance covers bring in big sized policies. Similarly the infusion of additional capital to meet the solvency norms is a function of formula that takes into account the policy size as well as the insurer's probable liability. So it is not right to say the ULIP requires lower reserving requirements. I will agree that the investment risk under ULIP is shifted to the policyholder. But ULIP is an outcome of demand for transparency.