The Hindu : Health insurance has to be redesigned

Online edition of India's National Newspaper
Friday, May 30, 2003

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Health insurance has to be redesigned — Rangachary

By P. Vikram Reddy

HYDERABAD MAY 29. Being the first Chairman of the Insurance Regulatory and Development Authority of India (IRDA), N. Rangachary has had to take on a pioneering role in regulating the insurance sector. In the course of affecting structural changes, he has had to take some `hard' decisions, and some that were `unpalatable' even to the Government.

A modest gentleman by any standards, Mr. Rangachary, who is stepping down from office on June 9, sums up his tenure saying he had been doing the "right job at the right time and at the right place".

His views on the Government's proposal to create a separate regulatory authority for pension funds, as also his stand on setting up of the Institute of Insurance and Risk Management (IIRM) here in cooperation with the Andhra Pradesh Government, are some of the issues that are being talked of, even as he prepares to step down.

Reminiscencing on his seven-year tenure during a chat with The Hindu here on Thursday, Mr. Rangachary tried to list out what his achievements were, as also some of the unfinished tasks, which obviously his successor will be taking up.

The biggest achievement, of course, was the successful opening up of the insurance market and admitting new companies in both life and general insurance, professionalisation of intermediation, and putting in place the system of appointing actuaries by insurance companies. Though appointed by companies, they have to be approved by the IRDA. In one case, based on IRDA suggestion, both the CEO and the actuary of a company were replaced! This only reflects the success of IRDA as a watchdog.

Unfinished agenda

<167,2p,1>There is, however, quite a bit of unfinished agenda. The biggest task that lies ahead is the proposal to create a database for health insurance. About 6 to 6.5 per cent of GDP is spent on health care. Of this about 1.5 per cent comes from the Government, and the balance (4.5 per cent) from individuals. "We have to redesign the health insurance. And for this, creation of data base is crucial, though it is expensive," he says.

The IRDA is, in fact, having discussions with a foreign company and an Indian company, both of which are associated with hospitals and hospital administration. But the rates being quoted are very high. The expenditure could be about Rs. 60 crores. But who will pay for it? The regulator may bear the expenditure and make available the database. But then an annual levy on users would have to be allowed.

The IRDA, he said, is talking to a couple of companies to design a system to gather, record, retrieve and use medical data for common access and use. This includes database to enable building various models. Components of the database would be economic status, hospitalisation, and time and money spent by people on treatment. Given the enormity of the task, it should take at least a year to collect such a database from the take off point, he felt.

On life insurance, he felt that the sector did well to adjust itself and redesign and redefine its philosophy, and in the process service levels had gone up. However in general insurance, the problem of adjustment still persists. This is because it is basically a short-term product, where quick redressal is expected. Then, of course, there is the latest controversy of the Central Government writing to the IRDA Chairman, not to associate with the IIRM and to retrieve the Rs. 11 crores given to it by the IRDA.

Perhaps as an attempt to justify his decision, Mr. Rangachary said the Andhra Pradesh Government had given five acres for setting up IRDA in Hyderabad (financial district), and promised another five acres for IIRM. The institute, in fact, has started an MBA course on insurance in Jakarta with 20 students. There may be 15-20 per cent savings for the institute. Similar courses are planned in Thailand and Malaysia. Pension courses will also be there on demand.

"I have given a reply," he said declining to reveal the contents of his letter. However he seemed somewhat surprised as to why the Government did not want the IRDA to be associated with the Government of Andhra Pradesh in setting up the institute. "It is strange that they (the Central Government) did not discuss the issue with me," he observed.

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