Need for Corporate Governance in Insurance Sector
Insurance industry bears a fiduciary relationship with policyholders and long term performances. The honesty and integrity of insurers are paramount important as the industry has financial functions. Officers and employees can break the regulatory measures and enjoy the money of policyholder. No insurer will be successful unless his integrity is tested as sound and useful for the effective performances of the functions. The need of corporate governance is realized for confidence building change-management, investment and viability.
Confidence
Insurance is based on confidence. New insurance companies can develop only if the old insurance companies have demonstrated honestly and integrity. For example, LIC has proved the insurance has sore reign guarantee. Long term contract is built only on confidence. Insurance particularly life insurance is long-term contract. There should be benchmark standards against which insurers should demonstrate public image.
Change management
Insurance companies are facing several changes in the society. They have to cope with changes and come forward to challenge the changes. It has been observed that insurance industry is growing faster than GDP. Specialized insurance companies are entering in the market. Many foreign companies have entered in India to conduct insurance business. Health insurance is becoming a need of the hour. The insurance companies have to manage themselves for maintaining safety and solvency. Non- insurers are growing in detarrified era challenging their fair play, policyholders servicing and transparency.
Investment
Insurance companies manage their funds through investment which involves safety solvency risk management and protection of policyholders’ interest. The actuarial experiences also help decide insurance expansion. It grapples greater challenges such as increasing number of good governance standard against which the companies conduct and performance would get measured against these backdrops. They have to live up with securities market and governing rules. SEBI has formulated several rules and regulation which have to be followed by the insurer.
Viability
The insurers have to prove their viability. Many new and existing companies now enter in the insurance business. Foreign, insurance companies have to prove their viability. Public sector insurers have proved their viability and private sector insurers have to operate in a safe and sound manner and in accordance with the applicable rules and regulations.
Insurance industry bears a fiduciary relationship with policyholders and long term performances. The honesty and integrity of insurers are paramount important as the industry has financial functions. Officers and employees can break the regulatory measures and enjoy the money of policyholder. No insurer will be successful unless his integrity is tested as sound and useful for the effective performances of the functions. The need of corporate governance is realized for confidence building change-management, investment and viability.
Confidence
Insurance is based on confidence. New insurance companies can develop only if the old insurance companies have demonstrated honestly and integrity. For example, LIC has proved the insurance has sore reign guarantee. Long term contract is built only on confidence. Insurance particularly life insurance is long-term contract. There should be benchmark standards against which insurers should demonstrate public image.
Change management
Insurance companies are facing several changes in the society. They have to cope with changes and come forward to challenge the changes. It has been observed that insurance industry is growing faster than GDP. Specialized insurance companies are entering in the market. Many foreign companies have entered in India to conduct insurance business. Health insurance is becoming a need of the hour. The insurance companies have to manage themselves for maintaining safety and solvency. Non- insurers are growing in detarrified era challenging their fair play, policyholders servicing and transparency.
Investment
Insurance companies manage their funds through investment which involves safety solvency risk management and protection of policyholders’ interest. The actuarial experiences also help decide insurance expansion. It grapples greater challenges such as increasing number of good governance standard against which the companies conduct and performance would get measured against these backdrops. They have to live up with securities market and governing rules. SEBI has formulated several rules and regulation which have to be followed by the insurer.
Viability
The insurers have to prove their viability. Many new and existing companies now enter in the insurance business. Foreign, insurance companies have to prove their viability. Public sector insurers have proved their viability and private sector insurers have to operate in a safe and sound manner and in accordance with the applicable rules and regulations.