Page 112 - DMGT512_FINANCIAL_INSTITUTIONS_AND_SERVICES

Unit 8: Insurance Sector

Role of Underwriters Notes

Underwriters assume great significance as they play an important role for every issuing company.
This role can be understood by going through the following points:
1. The issuing company is relieved from the risk the risk of finding buyers for the issue
offered to the public. The company is assured of raising adequate capital.
2. The company is assured of getting minimum subscription within the stipulated time, a
statutory time, a statutory obligation to be fulfilled by the issuing company.
3. Underwriters undertake the burden of highly specialized function of distributing securities.
4. Underwriters provide expert advice with regard to timing of security issue, the pricing of
issue, the size and type of securities to be issued, etc.
5. Public confidence on the issue enhances when underwritten by reputed underwriters.

Caselet IRDA's Guidelines on Outsourcing get Mixed
response from BPOs

Norms to make insurer responsible for outsourcing arrangement.
'Core' Problems

Only 'non-core' functions like house keeping, data entry, etc., can be outsourced.
Most 'core' functions that cannot be outsourced in India are outsourced in the West.
One way out for insurers could be forming joint ventures with back office companies.
The Insurance Regulatory and Development Authority's (IRDA) recent norms on
outsourcing may prompt insurers to increase the quantum of back office work they give
out to third party vendors in the medium term.

However, it will deter Indian back office companies from moving up the value chain as
they remain stuck with low-end processing-related work, say industry watchers.
In its draft guidelines on outsourcing, IRDA had defined the processes that could be
outsourced and those that should be done in-house. Core functions such as product design,
claims, IT support and policy servicing were functions that could not be outsourced. Non-
core functions include house keeping, Web site management, internal audit, payroll
management, HR services, data entry, medical check-ups, tele-marketing and call centre
for outbound calling among others.
"Lot of insurance companies are waiting for norms on outsourcing to come through…now
it is good for them to know what they can outsource and what they can't. I expect the new
guidelines to open up the market in the medium term," said Mr Sanjay Venkataraman -
Executive Vice-President and Head-Asia Business Unit, Firstsource Solutions.
End-to-end Responsibility
Firstsource Solutions works with one of the largest private insurance players in India. Mr
Aparup Sengupta, Managing Director and CEO of Essar Group-promoted Aegis BPO,
believes the new norms are designed to formally place end-to-end responsibility of the
outsourcing arrangement on the insurer. "Insurance companies can no longer pass on the
Contd...

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