Insurance Sector Reform in India

Abstract

Deloitte was contracted to work with India's newly formed Insurance Regulatory and Development Authority (IRDA) to help them strengthen their ability to develop and regulate the insurance market in India. As a result of this collaboration, the IRDA's institutional capacity and supervisory capabilities were strengthened, which increased their ability to supervise insurers' compliance to laws and regulations, improved transparency, and enhanced mobilization and allocation of resources generated from insurance.  A major component of the project addressed improving access to health care services for Indian citizens through private health insurance products.  Deloitte provided knowledge and support to help guide the development of private health insurance options as well as products targeting vulnerable populations including the rural poor and the elderly.  In addition, Deloitte assisted the IRDA to adopt a regulatory platform that enabled the establishment and entry of new stand-alone health insurance companies into the marketplace.

The Challenge

The Insurance Regulatory and Development Authority Act was passed in India in 1999, which allowed the introduction of private companies to participate in the insurance market in India and named the IRDA as the sole insurance regulatory body to oversee all insurance-related activity. The mandate of the IRDA was to both regulate the insurance industry, and also to help develop the market. Prior to the Act, insurance in India was a state monopoly. As a newly established entity with a daunting mandate, the IRDA sought USAID technical assistance to help build its institutional capacity to apply leading international practices for the newly created private insurance industry and its supervision.  In addition, the IRDA needed to address deepening and broadening insurance penetration, particularly among those residing in India's rural areas and the poor. Both of these groups comprise a large percentage of the Indian population.

How We Helped

Deloitte provided a wide-range of technical assistance to the IRDA while supporting institution-building efforts of other stakeholders working within the insurance market in India.  Specific activities included:

• Designed and implemented trainings for the regulator in most aspects of the regulatory cycle. Special focus was placed on encouraging the practical application of principles of health insurance, health economics and managed health care as well as in actuarial methodologies used in the scientific pricing and reserving of health insurance products
• Assisted the design and installation of an IT-based “early warning system” to monitor insurer solvency
• Introduced supervisory tools and examination manuals for on-site financial condition examination and market conduct inspection of insurance companies
• Assisted the association of actuaries to adopt a more broad actuarial education curricula and apply modern actuarial methodologies
• Organized two internship programs in cooperation with the US National Association of Insurance Commissioners (NAIC) to enhance IRDA staff's knowledge and skills in insurance supervision  and take advantage of on-the-job learning in several state insurance departments in the United States;
• Supported IRDA in framing regulations for micro-insurance, allowing for the distribution and administration of micro insurance products including health insurance. This enabled NGOs, community-based organizations, and MFIs to offer and administer micro insurance schemes in rural areas particularly for the poor and vulnerable, thus making insurance for the economically vulnerable more accessible
• Provided assistance in capacity-building activities for the associations of life insurers and general insurers, particularly in areas relating to self-regulation
• Actively participated in forums and round table discussions about the challenges and opportunities created by the insurance reform.

Solution

The productive collaboration under the USAID-funded project resulted in strengthened institutional capacity of the IRDA, with a special emphasis on equipping it to deal with changes in the insurance industry's competitive profile, institutional framework and professional landscape.  The benefits of the project continue to be felt in India today, with ongoing internships in the United States to facilitate continued learning and information exchange for IRDA staff.  In addition, the project contributed to significant changes in India's insurance industry, particularly with respect to the entry of several private health insurance companies that have helped make insurance coverage more accessible and better tailored to diverse consumer needs.

As used in this document, “Deloitte” means Deloitte Consulting LLP, which provides strategy, operations, technology, and human capital consulting services, Deloitte Financial Advisory Services LLP, which provides financial advisory services, and Deloitte & Touche LLP which provides governance and risk oversight and reporting advisory services. These entities are separate subsidiaries of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.