Rangachary was chairman of the Central Board of Direct Taxes under Dr.
Manmohan Singh who first thought of him as the insurance regulator in
March 1996. P. Chidambaram confirmed and fully backed him as did Yashwant
Sinha. More than any single individual, it was Rangachary who prepared
the roadmap of the opening-up, drafted 27 regulations so as to promote
competition and protect consumer interests, engaged with prospective
entrants, lobbied with MPs for supporting legislation, carried out an
extensive public awareness campaign and laid the foundations for the
professionalisation of actuaries, agents, brokers and surveyors. He
was also not averse to taking on both the government and the public
sector companies in his bid to create a true “level-playing field”.

It was only over the past year that the tide turned with even Jaswant
Singh strangely acquiescing in the emasculation of IRDA’s independence.
There is a battle over who will control revenue of about Rs 35-40 crore
accruing annually from the levy on insurance companies. Since insurance
companies are in the annuities business as well, it is only appropriate
that IRDA regulate the important pension sector also. That was the original
idea. But the government is going ahead with a separate pension regulatory
authority. The finance ministry is also questioning the association
of the Andhra Pradesh government in the setting up of the Institute
of Insurance and Risk Management at Hyderabad where IRDA is headquartered
thanks to Chandrababu Naidu’s persuasive powers. To make matters worse,
the finance ministry now wants to bring in a joint secretary dealing
with insurance on IRDA’s board to “scrutinise” its functioning-a clear
case of conflict of interest since this individual is also “responsible”
for LIC and the general insurance companies.

While the growth of the insurance market through competition will throw
up new issues like pricing, IRDA must now focus on two vital areas.
First, social and rural insurance needs major expansion in the strict
risk-adjusted premium sense of the term-this is as true for the new
as for the old companies. Today, the so-called “social obligations”
of the LIC and the GIC are actually schemes funded by the government
with the public sector companies acting as executing agencies. Rural
and social insurance will call for innovative distribution through,
for example, the use of post offices, banks and outlets like ITC’s e-choupal.
Second, health insurance coverage must deepen beyond the 7.7 million
or so Indians who are covered presently. In 2002/03, health insurance
premiums at Rs 1045 crore accounted for just 7% of all non-life premiums.
Expenditure on health is probably the single most important reason for
indebtedness of rural families. For both rural and health insurance
to expand, dairy and sugar cooperatives and organisations like SEWA
need to be encouraged through liberal capital and solvency norms.

Of all the regulatory bodies, IRDA has established the most enviable
record for competence, credibility and transparency. His successor,
who has been a distinguished civil servant himself, should be allowed
to carry on in that mould.