Insurance firms may have to publish annual reportsDecember 31st, 2008 - 12:46 pm ICT by IANS
Chennai, Dec 31 (IANS) Insurance companies may soon have to publish their annual reports in newspapers to bring more transparency. They have also been asked to furnish details of investments made in stock markets between September and November, a senior member of the country’s regulatory authority said.”We’ll soon stipulate that insurers publish their annual reports,” said R. Kannan, member-actuary with the Insurance Development and Regulatory Authority of India (IRDA), the watchdog.
“Moreover, insurers will start doing that on their own because of peer pressure and also when they go for credit rating,” Kannan told IANS, alluding that as of now transparency was at a premium.
Only a few companies like Bajaj Allianz post their annual reports on their websites. This apart, little is known about the investments made in stock markets by insurance firms. Although the regulator does not openly say it, it suspects investment decisions made by life insurers.
“We have asked insurance companies to provide us with information on investments made between September and November,” said Kannan.
“With the regulator soon expected to come out with regulations for mergers and acquisitions, the time is ripe for bringing more transparency,” said P.S. Prabhakar, a chartered accountant and an industry expert.
He said better corporate governance was particularly required in the life insurance sector - an opinion shared by R. Ramakrishnan, a member of the R.N. Malhotra Committee on Insurance Reforms set up in the 1990s.
“Life insurers deal with public money and a lot of public interest is involved. Life insurers have to advertise their annual report in newspapers as practised by the banking sector,” said Ramakrishnan.
But some private sector insurers do not agree.
“Policyholders need not know about profit or loss or the assets and liabilities of an insurance company. They are not creditors or investors,” said an official in a leading insurance company.
“It takes more than seven years for a new life insurer to break even. So, if a prospective policyholder sees that the company is making losses, he or she may not buy any product from it. This goes against the spirit of liberalisation.”
The watchdog has laid down proper regulations that are related with disclosures of product details. This apart, insurance firms also have to follow stringent solvency norms which ensures that their financials remain healthy, he added.
Prabhakar, nevertheless, said the regulator must stipulate that all domestic insurers publish their accounts at least after a certain fixed time.
“Insurers should not be allowed to keep accounts under wraps in perpetuity,” he said. “A policyholder should know if the insurance company has sufficient assets to pay off its liabilities.”
Ramakrishnan said Section 20 of the Insurance Act provides for a person to ask for a copy of the valuation report of each life insurer on payment of specified fees.
“The report details the surplus or deficit in the life fund, the bonus rates and other vital data about a life insurer,” he said, adding only when accounts are under scrutiny will insurers be forced to look at operational efficiencies and not just the top line growth.
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Tags: assets and liabilities, bajaj allianz, chartered accountant, insurance development, insurance firms, insurance reforms, leading insurance, life insurance sector, life insurers, mergers and acquisitions