To learn how to draft investor friendly regulation,IRDA should call on Sebi

The contradiction is telling. India’s youngest regulator in the financial services space, Insurance Regulatory and Development Authority (IRDA), born on April 19, 2000, in the age of transparency has been and continues to encourage opacity. It seems more concerned about the business and profits of insurance companies than in protecting consumers. Its actions seem more embedded in the second part of its mission statement (“promote and ensure orderly growth of the insurance industry”) than in the first: “To protect the interests of the policyholders.”
Titled “ULIP Products”, its August 18, 2007, rambling press release reflects this irony. The first para notes, “IRDA is keen to ensure that unit linked products are transparent and that customers (SIC) from every walk of life can compare features and charges across products and across companies.” Great — the regulator has finally woken up to the loot that has been happening in the garb of insurance over the past two to three years, and which we have been regularly highlighting.

Opinion in The Indian Express, August 27, 2007

Repricing of risk is a fig leaf. Or how the suits ravaged the financial markets --- yet again

Even as the reverberations of the financial earthquake that hit the financial markets on July 26 are still rattling the retirement plans of millions the world over, a new term has re-emerged, as if defining the problem would make it go away. Money managers, now exposed, are standing helpless before a market that like the serpent that ate its own tale is beginning to gnaw. As the fine clothes come off and the high tide of a global bull market recedes, we see just what’s lying beneath the Armani suits — a herd. They invested as a herd, and are now pulling out like a herd. Naked they stand but together as herd, hanging on to anything that can justify their irresponsible behaviour. The newest straw they’re clutching at is called ROR (repricing of risk).
Sitting halfway across the world, in a country where the currency is not fully convertible, where subprime borrowers or their lending banks don’t exist, where products like CDOs (collateralised debt obligations) aren’t seen, where rating agencies have not graded them triple A, and where investors, particularly, hedge funds have not bought them, investors are still coming to grips with this new animal, ROR. But the market is not giving them time - with the Sensex is down 1,400 points (9 per cent) in 14 trading sessions, experts are throwing new numbers (it can go as low as 9,000-11,000) and old advice (at 12,000 it would be time for bottom fishing). All because of ROR.

Opinion in The Indian Express, August 18, 2007

Towards a new Swarajya

The freedom we got six decades ago was the starting point for another imprisonment --- we, the nation, were under the custody of those who we saw as our own. And if we thought that a change in the colour of the skin really made us free, surely it was disillusionment of the worst sort. Around halfway through our false freedom, came real chains again, with the Emergency fettering us to our poverty and a self-perpetuating and dictatorial power elite. Another fight, another freedom. It took us another two decades before we tasted economic freedom. A higher freedom still awaits us.

Opinion in The Indian Express, August 12, 2007

Six decades later, it’s time to celebrate Financial Freedom Day

I don’t want to waste time talking about how inefficient, ineffective and invalid the pre-liberalisation thinking on matters of economics and personal finances of Indian citizens was --- millions of trees have been uprooted to tell those tales. That the methods didn’t work and its sole achievement was to ensure that the rich in the name of the poor, the powerful in the name of the powerless, benefited through preservation of their little empires that prevented an enterprising Indian to put a foot on their well manicured, well protected turf.
At a time when getting a job was a license to keeping it for life --- companies employing people were few and completely protected from even a whiff of competition --- a whole new culture was hammered into a people who had just delivered the biggest enterprise of all: Freedom. Fresh from the independence struggle, these risk taking soldiers of freedom returned not as soldiers of fortune but slaves of security. Here you have a man who risked his life, and definitely his career, fighting an imperial Government turned into one whose sole aim became financial security. A butterfly turning into a caterpillar.

Opinion in The Indian Express, August 11, 2007

How I got the girl, her money and learnt to invest in stocks

They weren’t easy times, but armed with a degree, a pair of Bermuda shorts and oodles of enthusiasm, I joined the workforce around the time when Sebi wasn’t born and when Harshad Mehta was becoming a phenomenon and his ‘buy-lists’ were the most sought after paper in the financial sectors — attitudes were turning, investors were winning, and the market was rising. The day I joined, the Sensex, which to me then was a mere number, rose 8.5 points. A good omen, I thought.
When I saw her, a humble wide-eyed trainee like me, I knew this was it. That made it three in one day - a job, a Sensex rise, the girl. But how do you woo a girl who apart from the flourishes also has a brain that questions? My editor — the first of many who would invest in my ‘potential’ — gave me the answer in the form of a dream assignment. “Take charge of investing pages for us,” he said. Before I could say, I don’t know the S of Sensex and the I of investing, he was gone.

Opinion in The Indian Express, August 04, 2007

Up, through highs and lows

July 27: 542 points down. July 30/31: 316 points up. August 1: 615 points down. The uncertainty has only begun, with the Sensex rising 50 points yesterday. This seesaw is here to stay and for investors who came in over the last four years, who so far have only met Mr High Returns, it is time to look at his shadow, Mr High Risk. Like it or not, Mr Risk accompanies Mr Returns. Sometimes investors think Mr Returns is their friend, and put in money as if the friendship will end if the increased investing stream ends — this is what has happened over the past four years, between May 2003 and today. At other times, investors feel close to Mr Risk and look to another entity, Mr Zero Risk, whose shadow is Mr Low Returns — the period between February 2000 and May 2003, for instance.

Opinion in The Indian Express, August 02, 2007

The agent may be mis-selling but why has IRDA allowed such an incentive structure?

There seems to be only one direction the insurance industry is headed: Down. Every other day we hear stories about how, in the pursuit of higher commissions, insurance agents are selling one investment product (ULIP) after another and not life cover (term policy). Households pay exorbitant upfront commissions that go as high as 40 per cent for a 20-year product, but the agent either disappears after three years or returns to churn the money into a new 20-year policy. Much has been written about this but most of the industry, regulator Insurance Regulatory and Development Authority (IRDA) and the Government have nothing to say or do.
What’s new is a two-day old email from an alert doctor. Here’s what he wrote: “I would like to draw your attention to a leading insurance company’s strategy. Recently, its agent offered to pay in cash if I disclose my diabetic patients’ names to the insurance company. Also, if anyone takes this insurance policy (offered to diabetics only), additional cash will be paid. And if more patients take the policy, other offers such as a Malaysia trip [are offered], according to slab.” He concludes saying, “Doctors are not expected to reveal diagnosis of a patient unless asked by court of law.”

Opinion in The Indian Express, August 01, 2007