G Srinivasan, who is currently the Director of National Insurance Academy (NIA), has served the insurance industry for four decades (and counting). He has served as the Chairman and Managing Director (CMD) of New India Assurance (the largest Indian non-life insurer) and also United India Insurance.
In today’s ‘Grow with Governance’ session, Srinivasan, who is also currently on the Boards of many companies as Director and Chairman both in India and abroad, talks about his rich journey. Srinivasan, in a conversation with Free Press Journal’s Jescilia K and MentorMyBoard’s Bharathi Iyer, highlights the need for governance that goes beyond compliance.
How important is the role of Directors in the new era of catastrophe?
The role of Independent Directors (IDs) is very important for any institution. Insurance companies deal will policyholders’ funds. Thus, the role of IDs is all the more important.
In a life insurance company, 90 per cent of the funds they hold are of policyholders. In general and health insurance companies, 80 per cent of the funds are of policyholders. Thus, the role of the board of directors cannot be underestimated.
Today, the insurance industry is facing a lot of challenges mainly due to the COVID pandemic.
In the case of life and health insurance companies, the number of claims went up in the second wave. The claims ratio of all the companies had been badly impacted.
The positive side is that business has seen growth and people understand the importance of insurance today. This has been the silver lining in this.
IDs bring an unbiased and independent perspective to the board. They not only protect the rights of shareholders but also stakeholders. This allows companies to take a more sustainable approach, during such times.
Are IDs sensitised enough about cybercrimes which are huge risks to business today?
Cybercrime is an issue, especially during the pandemic. Today, one of the challenges companies face is their exposure to cyber risks. It is very important for the board to be cognisance of the fact.
In the sessions, NIA runs for IDs today, we usually sensitise them on cyber risks — on type of cyber risks, how to protect the company with adequate insurance, need for cyber audits etc. The reason is that the board has to play a very important role in these matters.
They have to prepare the companies for these risks they may face. For instance, I know of an incident where a financial institution would have faced a massive loss if a transaction was not stopped at the last minute.
The board and the IDs have to be sensitised in this critical matter.
Tell us about your journey in the insurance space.
It is a long journey when you count the number of years -- four decades. I have worked at the grassroots as well which helped me understand insurance better. I worked not just in India but had a stint overseas as well.
Most of my years were in the New India Assurance. It has been a very rich experience for me. I did not choose insurance as a career but came in by accident. But I really enjoyed it.
This is a profession where you can do good for people at the time of distress. This has been a satisfying journey.
Two years back, I joined NIA as I wanted to give back to society what I learnt and prepare the next generation of talents for the industry. As NIA is also a think thank, it advises regulator IRDAI on the key changes needed for the industry. In this role, you are not only developing the industry but shaping the industry as a whole.
You spent many years in insurance. But how did the GIC Housing Finance (HF) stint happen?
I got on the board of GIC Housing Finance because New India Assurance is the promoter of GIC HF -- that is how the association started. This association with GIC HF continues even today as an Independent Director. It is a different area but part of the financial services. I am on boards of many insurance and insurance associated entities at present. But I will be happy to be associated with other entities as well. As a board member, it is not always about a particular domain but it is about varied skills that you can get on board which is useful to the board.
How can home insurance numbers rise and GIC HF’s role in this?
Many people do not insure their homes in India. In India, hardly 2-3 per cent of homes have insurance. Today, India is facing a lot of catastrophes. Home insurance should be made necessary. The industry has been talking to the government to see if people especially vulnerable groups can be covered. Talks are on but nothing has materialised.
Like many HFs, GIC HF ensures that home buyers along with home loans also take insurance, more like collateral.
Shouldn’t more company boards promote insurance among their employees?
This is where board culture is important. If the culture is there, these things will fall in place. Many times, IDs keep quiet. To bring in governance, there is a need to ask more questions. Then only can the board function well.
Governance is more than compliance. It is about the basic requirements. It is something that happens on its own and has a broader connotation.
What are the few things that are important for IDs?
Firstly governance means transparency and openness. At NIA, we are doing a project on who are the stakeholders of the company and how should they be rewarded by the company. The role of the board is to take care of all the stakeholders.
The second is getting exposed to the various risks that are present which include cyber risks, climate risks and others. So, that the board can adopt risk mitigation processes.
Thirdly, sustainability of operations. The insurance companies will have to look at long-term rather than short-term (quarter on quarter basis). The board has to play an important role to ensure if the business is sustainable. The role of the board is to provide leadership to the company.