The sale of an Indica and a lesson in developmental econ

Expense Account, Mint

I did not know that when I put my eight-year-old, beat-up Indica (should have clicked the faces of some people when the family would get into that car!) up for sale that the experience will become a lesson in developmental economics and will document a little part of the story of a transforming country.

A viable Metro system, fire-snorting SUV drivers, jammed roads, the rising cost of running and maintaining two cars all held hands to move us from a two-car to a one-car house. Though we loved our old Indica—legs actually have room, an ignored speed-breaker will not cause roof damage by a sharply hitting head and a general sense of rough sturdiness that is a must-have on Delhi roads—the downsides at some point began to take over. The Indica begins to unravel after five or six years and its real soul begins to manifest. The soul says over and over again, every day: I’m really a truck masquerading as a car.

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Irda opens the door to getting banks to focus on mis-selling

Expense Account, Mint

The increasing confidence of the Insurance Regulatory and Development Authority (Irda) showed two weeks ago when it slapped a fine of Rs 1.47 crore on HDFC Standard Life for some five violations out of a list of 25 charges. Indian regulators are not known to levy large sums as fines. Probably the highest fine levied by the regulator till now, the move showcased Irda’s ability to go beyond the defunct Rs 5 lakh limit that the Insurance Act insists on. Fines and penalties are governed by the Insurance Act of 1938 that caps fines at Rs 5 lakh. Must’ve been a large amount 70 years ago, but now it does not even buy the paper that an insurance company will write its policies on. Inflation indexed at 6% a year, that limit should’ve been at Rs 3.7 crore today and this would have translated into a Rs 109 crore fine for HDFC Standard Life or almost 40% of its 2011-12 profits. Right now the fine bites less than half a percent of profits. The world has moved on from 1938 and now the limit should be reworked to a floor and not a ceiling. The stalled Insurance Bill has been frustrating not just for companies that wanted the foreign direct investment (FDI), but also for the regulator, which wants more teeth. Irda has been innovating on the fly to bite down harder on the companies. It is splitting the fine across years, across aggrieved policy holders, across any category it can find to impose the maximum fine of Rs 5 lakh in a more meaningful manner. HDFC Standard Life, for example, has been fined Rs 1.05 crore for ignoring an Irda notice to waive the 90-day waiting period in home loan-linked life insurance policies in 2003. There were 21 policy holders whose claims were rejected and apportioning Rs 5 lakh each to them, Irda has instructed the insurance company to not only pay the claim but also pay a fine.

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