Insurance Regulator Mulls Segmented Balance Sheets

The insurance regulator is considering asking companies for segmental reporting of balance sheets, in order to see loss and profit, expenses, and others for each category separately, especially for segments like group health, where insurance companies are facing losses. Speaking to reporters on the sidelines of a seminar organised by the Insurance Brokers Association of India, T S Vijayan, chairman, Insurance Regulatory and Development Authority of India, said, "Many insurance companies chase top line and group insurance products in one segment that immediately adds to the revenue. But in such cases, the companies don't show profit and this is a cause of concern. Once companies start segmental reporting of balance sheets, it will be evident which particular segment has losses."

Premiums should ideally cover expense and claims. The regulator's concern is that current premiums in group health segment are not justified. Segmented balance sheets will show if a company exceeds the expense cap in a particular segment, such as group health. If so, the regulator can ask for an explanation from the company. This will bring discipline and sensible pricing of premium in group health. Even motor insurance is a loss-making segment and the regulator has tried to increase the pricing by recommending higher third-party premiums. But as long as third-party insurance continues to be mandatory, pricing controls will stay, the chairman said. "Once something is mandatory, you cannot make pricing free because insurance companies may charge any price. Premium has to catch up with the claim amount. So far it has not." he said.