Public Disclosure by Indian Life Insurers - An Empirical Study

Abstract

As the Indian insurance industry was characterized by the presence of only public sector players and with the life insurance side being a monolithic structure devoid of even little competition, information disclosure has never been considered very vital. The present day insurance industry, however, boasts of a more number of players. It has embarked upon the process of public disclosures being made by insurers in the recent past (January 2010). Public disclosures provide information to the policyholders to make necessary’ decisions before entering into a contract and strengthen corporate governance and market discipline for the insurers. In light of establishment of the apex body, Insurance Regulatory and Development Authority of India (1RDA) in 1999 and its introduction of standards on public disclosures for the insurers, this study, using content analysis, analysed the public disclosures made by the Indian life insurers on their websites. It is an empirical study and the sample included all the Indian life insurers both public (1) and private (22) numbering 23. Public Disclosure by Indian life insurers is mandatory and given in a set of 42 statements containing specific information about the working of an insurance company targeting the stakeholders at large. For the purpose of this study, an original Life Insurer Public Disclosure Index (L1PDI) was developed by classifying the statements into six attributes which relate to actuarial, investment, corporate governance, financial, policyholders and insurance agent. Through content analysis method, the availability, completeness and relevance of the information given in the public disclosures were analysed. The period of the study ranges from 2005-06 to 2010-11. This study used statistical tools such as Chi Square Test, Correlation and ANO FA. It was found that there is adequate public disclosure by Indian Life Insurers but there exists a significant company-wise difference. Public disclosures lend a higher level of credibility only when there is uniformity, lucidity and accuracy in the type of disclosures made as also the periodicity and entirety at which the information is provided in order to make meaningful comparison.