Doctor, banker, trader, broker

Expense account, Mint

Though I’ve noticed the similarities between healthcare and retail finance, the inherent conflicts of interest in the business models of the two snapped into focus as I watched the latest episode of Satyamev Jayate. For those who did not tune in, the show focused on the conflict of interest in healthcare where doctors cut open healthy people to make money (prescribing a liver transplant where none was required and killing the patient was just one case), where commissions on laboratory testing drive private practice and kickbacks and gifts nudge the use of branded medicines on prescriptions instead of the generics that cost a fraction. While the manufacturer and the service provider collude, the patient suffers—both in terms of adverse health results (loss of life and body parts) and in terms of money.

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Should banks sell insurance at all?

Expense Account, Mint

Because much of policymaking in India is about lobbying power, we see some strange outcomes. Take the draft bancassurance guidelines, for example, that lay down the rules of bank tie-ups for insurance companies. The weird spectrum-like allocation of banks to insurance companies is a classic example of a compromise that benefits no one and will actually harm the market. Recent events in the bancassurance space that point to some companies tripping over regulatory boundaries corroborate this. The evolution of the November 2011 bancassurance draft guidelines (you can read them here) is the story of a face-off between two evenly matched lobbies. On one side is the insurance industry, with its flagship government-owned default sovereign wealth fund, the Life Insurance Corp. of India (LIC). And on the other is the banking sector whose lobbying power kept our money earning nothing because of a rigged formula to calculate interest rates on savings deposits that were fixed at 3.5% for years. The story of how the draft bancassurance guidelines came to be have enough masala to run a full Bollywood trilogy. But as of now, the banks are ahead.

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