Is Royal Sundaram Alliance Insurance violating norms?

Is the Chennai-based Royal Sundaram Alliance Insurance violating Insurance Regulatory and Development Authority’s (IRDA) regulations by marketing products that are not certified by an appointed actuary?

According to IRDA stipulations general insurers should get their product pricing, risk coverage etc certified by an appointed actuary-full or part time. An appointed actuary is one who is a fellow member of Actuarial Society of India (ASI) holding a certificate of practice (COP) issued by ASI.

Interestingly, Royal Sundaram launched its products before its appointed actuary got his COP from ASI. The actuary had in fact qualified his product certification stating `subject to getting COP from ASI’. Incidentally Royal Sundaram is one of the few companies to have favoured an Indian actuary. The first private general insurance company to start operations is now selling fire, group personal accident and motor insurance policies to corporates, rural and city folks and has filed details of products like health insurance etc with IRDA.

Responds Mr. Antony Jacob, deputy managing director, "It is true that our actuary didn’t get the required COP from ASI. But the products launched by us are tariff products (products whose prices are fixed by Tariff Advisory Committee –TAC-) that doesn’t need to be certified by an appointed actuary."

Agreeing that the company’s group personal accident insurance policy is a non-tariff product he assures, "IRDA is aware of that and there is no violation of regulations." According to him the company will draw the actuarial expertise of Royal & SunAlliance Insurance Group, UK- the foreign promoter- while designing non-tariff policies.

Despite the slight hitch relating to the actuarial certification, Royal Sundaram has dared where even stronger and bigger insurance companies fear to tread in the Indian market. That is motor insurance segment where the four giant public sector insurers are incurring huge underwriting losses and clamouring for a premium hike.

Surprisingly Mr. Jacob says that he is comfortable with the existing premium structure fixed by TAC and adopted by his company despite having the flexibility to charge a higher rate. Royal Sundaram’s private car insurance policy-marketed by Amex, Citi Bank and Sundaram Finance Ltd-has couple of interesting built in covers, the extension for which government insurers charge extra.

The companys’ comprehensive car policy called `Car Shield’ automatically provides personal accident cover for insured unnamed passengers and paid driver for Rs. 1 lakh per person and legal liability for personal injury of paid driver. The policy also offers unlimited coverage for third party property damages.

With three regional offices the companys’ marketing executives are already into the markets to tap corporate accounts. "Worldover corporate business are procured by brokers. In India as IRDA’s regulations for broking firms are yet to be in place we are resorting to direct marketing. We would like to sign up with as many brokers as we could," remarks Mr. Jacob. According to him the company has already bagged several corporate accounts.

For selling personal lines of business Royal Sundaram has been signing agreements agencies like Citibank, Stanchart, Amex etc. Responding to the question as to how its marketing associates are selling the policies when IRDA is yet to finalise its corporate agency regulations Mr. Jacob says, "What we have signed with the above agencies are Letters of Intent (LOI). Our marketing associates are selling the policies based on LOI."

Expressing satisfaction on the company’s performance till date, Mr. Jacob is confident of achieving the targetted premium firguer of Rs. 120 crore during this fiscal. "Our first quarter performance is in line with the annual target," he adds while refusing to give any premium figures. Continuing further he adds, "By next March all our products –tariff and non tariff- will be ready for the market to buy."