Theirs Not to Reason Why... Theirs But to Comply & Die

In a lighter vein, Pawan Verma narrates the travails of dealing with compliance at various stages of business in the domain of Life Insurance.

When I was invited to contribute an article for the current issue of the IRDA Journal, focusing on Regulatory Compliance, my immediate impulse was to have an interaction with the industry experts so as to develop a comprehensive and inclusive view on the subject before writing something meaningful. Following the impulse, I set up an interview with the MD & CEO of a life insurance company. Warming up for the discussion over a cup of coffee, I asked him,

“What keeps you awake at nights these days?”

The CEO was quick in his response, “Oh! I sleep like a baby.”

I was literally flummoxed and flabbergasted, wondering how could the CEO of a life insurance company sleep like a baby in these turbulent times when the top lines are sliding down day by day like the Indian Rupee and the expense lines are soaring up month after month like the Indian inflation, while the bottom lines are discovering new bottoms every Quarter. Sensing my confusion, he immediately clarified,

“Oh yes, I sleep like a baby…waking up every two hours and crying… worrying about any regulations that my guys might have violated today accidentally and for which I was going to be hauled up by the Regulators the next morning.”

“But a sensitive IRDA would understand the problems of a CEO”, I said hesitatingly.

“You see, it’s not IRDA”, he continued, “We are really living in difficult times. After we got liberated from the British Raj, we aimed to build up the Panchayati Raj. But, what we got in return was the License Raj. Unfortunately, as we threw away the shackles of the License Raj in 1991, we got saddled with the Compliance Raj. There’s no escaping the Raj. Even though we may want to give up on the Raj, the Raj is not giving up on us.”

Listening to him, I could realize the difficult times we were living in. I remembered the good old days when as a college student I had walked into a bank branch to withdraw some money. As the teller had some problems with the signature of the young lady ahead of me in the queue, he requested her to identify herself. The lady immediately took out a mirror from her vanity bag, looked into it and declared innocently, “Yes, it’s me only”. The teller smiled and gave her the money. I am sure, if it were present times, the same teller would have insisted on a photo Id card and a residence proof, as the minimum requirement.

 We Also Sell Insurance

However, not to be overtaken by pessimism, I decided to talk to some other professionals in the industry and met the Distribution Head of another life insurance company. I asked him what was on top of his agenda these days. He explained that he was running an extensive program to train his entire sales force. Perplexed, I asked him, “Yours is a pretty old company. I thought you would have already trained your sales staff over the period of time.”

He was candid, “You know, while insurance is a mundane and static subject, compliance is a very dynamic issue, acquiring new dimensions every day. Hence we continue organizing comprehensive compliance training programs very frequently.”

“That means your sales must be looking up…”, I said.

“Oh! We also sell insurance… when we are free from compliance,” he replied, “but contrary to your expectations, our sales are going downhill.”

“I don’t understand this...more agent meetings should obviously translate into higher sales.”

“You see, earlier my agents were able to sell, unmindful of the implications of the statements they were making to the customers. But, having undergone the in-depth compliance training, they are now careful about what they say to the customers and how they say it. It has obviously been impacting our sales.”

“There must be some better way of addressing the situation…” I mused.

“No Mr Verma, I had always thought that one could reason out the rationale behind the compliance circulars and follow them in spirit, and thus compliance and sales could go together. But no, that doesn’t work. Oil & water mix better than sales & compliance. Today, we are in a situation where theirs not to reason why, theirs but to comply and die.”

The Cost of Compliance

I was lucky to get the CFO and the Appointed Actuary together in one room in the next company. The CFO was brutally frank, “The cost of compliance today is too prohibitive to run a profitable business.”  The Appointed Actuary however, was more practical and down-to-earth and thought that one must comply with the regulations without ever questioning the rationale behind the same.

“Once we added some more information in a regulatory report than asked for,” explained the wise man, “but we were hauled up for tampering with the sacrosanct formats created by the Regulator.”

Evolution of Compliance Culture

It is not that everybody in the system is equally unhappy and pessimistic. Compliance has brought happiness to a lot of people in the industry as well. In one of the companies, I met an old lady who had been doing the compliance function for ages. She was highly positive about the way the compliance culture in the industry has evolved over the years. She recollected her first day in the company and the HR Head’s words,

“Here’s your appointment letter as the Compliance Officer. Find out what it means and do it.”

As per her, compared to the past, compliance was taken much more seriously in the company now. But there was another reason for her happiness. As she put it,

“Earlier, I always had the problem finding out what to do next. But thanks to IRDA, I don’t have to do the thinking any longer. They do the thinking and tell us what do, when to do and how to do. Moreover, now I feel more secure about my job because there is enough to do and it is sure to be there irrespective of the business cycles.”

The Man at the Centre

However, my journey seemed to be incomplete without meeting the man at the centre – the Principal Compliance Officer (PCO). While talking to the different functional heads, I had always enquired what they thought of the PCO. They were unanimous in their opinion that they had developed an instant dislike for the PCO in the very first meeting…only to save time later.

The meeting with the PCO however, was very enlightening. A firm stickler for compliance, he sincerely believed that a stricter compliance regime was the solution for all the ills of the industry.

“Look at the level of mis-selling happening in the industry. I am of the firm opinion that every insurance sale must be handled by at least three agents – the first to canvass the customer, the second to verify if the product was explained to the customer properly and the third one to certify that the due sales processes were followed in conducting the sale.”

“But the cost and the productivity…” I wondered.

“Forget the cost, productivity and business numbers. Once the compliance processes are fully in place, these mundane things will take care of themselves over a period of time.”

Disinterested Directors

Pondering over the issue, I shared my thoughts with my wife that I needed to talk to some Director on the Board of a company as I believed that the compliance culture in a company had to be driven from the top and it was the top management alone which could remove the bottlenecks within the system.

Not always very kind to my thoughts, she immediately shot back, “Look, in most of the bottles that I have seen, the neck is always at the top.”

Even though clean-bowled by the googly, I refused to give up batting. I set up a meeting with the Independent Director on the Board of a company and asked him what he thought was the Board’s role in driving the compliance culture within the company. Sounding like a management guru, he said,

 

“I agree with you. The compliance culture in the industry has to be driven from the top – by the Board of the company. But we need to bring in systemic changes to make the Boards functional and effective. You see, as the institution of Independent Directors has failed to deliver, you need to develop on the American pattern, a cadre of Disinterested Directors, who will not have any fiduciary interest in the company at all and thus will be able to drive the compliance culture.”

The high-level wisdom completely left me dumb-founded. I was wondering if our Directors were not already “disinterested” enough – interested to the extent of their sitting fees only. Otherwise, what could explain the sorry state of affairs in the industry?

Taking It to the Next Level

My attempts to get the regulator’s perspective on the subject were frustrated because regulators all over the world are known for their reticence. They only react after you do the act. Even though I don’t share the cynicism, seasoned industry observers are of the opinion that across the globe, the regulators’ studied silence on controversial matters  and refusal to give advance rulings on critical issues are effective weapons to perpetuate their authority. If they explain in advance the rationale behind the regulations they make, will they not look like ordinary mortals like us? Who will be afraid of them in that case and how will they impose penalties and generate funds?

However, it was partly because of my own persuasiveness and partly because of the openness of our own industry regulator, that I was able to get a few regulatory sound bites on the subject. On the condition of anonymity, a very senior official dealing with the issue told me about his dissatisfaction with the state of affairs in the realm of regulatory compliance.

“You see”, he said, “we are still at a very primitive stage in terms of enforcing compliance in our business operations and we owe it to the advanced world to take it to the next level without any further delay.”

“But, Sir, I think our policies on Corporate Governance, AML, etc. are very well conceived and are right in place. Where’s the problem?”

“That’s the problem…that’s the problem, Mr Verma, with all of you. You guys are never able to think beyond the mundane and the ordinary. The need of the hour is to take compliance to the next level - beyond the fore walls of your organization. Are you ensuring that the vendors who work for you and the suppliers, who supply you, say pen and paper, are compliant? Are you ensuring that they don’t use child labour, that they conduct their own businesses in a fair and transparent manner?”

“These are noble thoughts sir, but difficult to implement”, I muttered hesitatingly.

“Not at all”, he countered, “If you want to follow global trends and remain relevant in a globally integrated economy, you don’t have much of a choice. Tell me, as a good corporate citizen, should you not stop doing business with a supplier who does not conduct his own business in a fair and transparent manner?”

I nodded in acquiescence, living up to my innate wisdom of never ever arguing with a regulator. However, my confusion had got confounded manifold – what were my options if I found that the electricity company supplying me power was non-compliant? Or, for that matter, could I refuse to be regulated by a regulator if I felt that the regulator was not conducting his business in a fair and transparent manner?

Customer - the Helpless King

Having been sufficiently enlightened by the industry experts on the various dimensions of regulatory compliance, I thought of talking to someone to whom the entire industry professes to serve – customer, the king. But I hesitated…could someone’s experience on regulatory compliance be different from mine as a customer? I remembered the day the courier had knocked at my door to deliver my credit card.

“I have brought your credit card, but, I need to check your Id before I can hand it over to you”, he had said after asking my name.

Not liking his stance, I said, “Look here, you landed at my doors looking for me. You must trust me that I am the right person.”

“No Sir”, he insisted, “I can’t hand it over to you unless I see your Id proof.”

Fairly agitated within, I shouted at him, “How dare you ask me to prove my identity in my own house?”

The courier boy was calm but firm, “No point arguing it, Sir. This has something to do with regulatory compliance. You show me the Id or I take the card back.”

I gave him a nasty look, conveying “don’t mess with the Customer – the King”, but simultaneously discovered that my right hand was helplessly extended to hand over the Id proof.

The writer is former COO of a life insurance company. He is available at pawan.verma@rediffmail.com

(First Published in IRDA Journal September 2013)

Playing the Game

Pawan Verma

The atmosphere in the room was tense. The minister for sports and youth affairs was in her chair looking pensively at the wall. No, she was not brooding over the rumors surrounding her. Whosoever is in the change of youth is bound to have affairs, she had earlier argued to herself sportingly. Today she had a different agenda. Peeved at the dismal performance of the Indian cricket team in Sri Lanka, she had summoned the chairman and secretary of BCCI for a hard talk.

Minister: I regret to tell you that I am thoroughly disappointed with the performance of the Board. Apart from playing politics, all of you must play some cricket also.

Jaywant Lele: Take it easy, madam. As you try to bring politics in sports, we bring sports in to politics. We are working for common ends.

Minister: Listen gentlemen, I am talking about performance. For all the fortune spent on tours and entertainment, you have not been able to develop a good cricket team. Tell me, why your boys start choking when the time comes to perform. Where are the bottlenecks?

JL: Madam, in most bottles, the neck is at the top.

Minister: You don’t get me. I mean, you haven’t been able to develop a team capable of consistent performance on the field.

A C Muthiah: I can accept any charge except this one. Look at our team’s performance. We have been quite consistent in losing matches. We have been losing them under different captains and coaches. Can you beat it? We go to eight consecutive finals over four years and consistently develop cold feet and weak knees out in the field. The problem is not with our cricket, it is with our knees.

Minister (Musing to herself: The fellow does make sense. The knee problem did surface even during Pervez Musharraf’s visit. Our media developed weak knees before the General). And then says: Knee, knee, I mean, no, no, our players need to develop some team spirit…

J L: Team spirit? I bet, you and me can take a lesson or two from them in this respect. Look at the way they sink or swim together. If one batsman succeeds all others succeed. If one fails, all the rest follow him to the pavilion in quick succession. Win or lose, they all stand united.

Minister: But you must do something to lift their individual spirits…

J L: Madam, You only need to see our players the night before a match. They are all in high spirits. So much so that they all become spiritual on the match day --- just do your duty and leave the results on God.

Minister: That’s it. Keep it up. Further, as minister for sports. I would like to make two suggestions for improving the team’s performance. First, give the boys a regular does of saffron particularly when they are playing in the neighborhood. It will give them strength and stamina to fight weak knees. Secondly, advise the captain to challenge the umpires more often. When the captain gets fired, his boys get fired up and win the match. Thank you, and best of luck.

(First Published in the Times of India, Edit Page, dated Jan, 12, 2002. It was written when Ms. Uma Bharati happened to be the Minister for Sports & Youth Affairs)

Walk and Watch

Pawan Verma

ALTHOUGH I have been taking morning walks for ages, I have never been able to decide whether, while walking in a circle, it is proper to walk from right to left or left to right. While the great majority walks from left to right, I prefer to walk from right to left. Walking anti-clockwise does not make me anti-establishmentarian in any way. I also know that moving from right to left these days is sheer foolishness because the left is fast getting out of relevance now. My friends also tell me that in this complex world, quite often, left is right and right is wrong. Therefore, while in Delhi, I should do what the Delhiites do.

However, I prefer not to walk along with the large majority for the simple reason that with so many beautiful ladies walking around the circle, walking behind them always gives the impression that I am following them. Honestly speaking, my job requires me to be a leader of men. Hence, I think, it is unbecoming of me to start my day as a follower of women. In fact, it is a catch-22 situation. Since all of them walk at a brisk pace, if you happen to be behind them, you appear to be chasing women. If you are ahead of them, you appear to be being chased by them. Interesting propositions by themselves, no doubt, but I would like to leave these pastimes for my teenager son to pursue.

Walking in the opposite direction, no doubt, deprives me of the great fan following available on the other side. Yet, it does offer some definite advantages as well. Seeing all those beautiful faces twice in completing a round is not a small consolation. It could motivate one to walk faster to complete the round quickly. The consequent benefits to one’s heart and physical fitness are the other welcome by-products. In addition, one can also benchmark one’s speed against a fellow walker from the opposite direction. Every inch of space gained in a round can inspire one to walk still faster.

For those, who come to Rajiv Chowk at Connaught Place more for morning watch than for morning walk, it provides a spectacle of sorts. Apart from the morning beauties, you also have walk-enthusiasts like the power-walker who would be walking briskly even in the rain, with an umbrella. Then, there is this man and his dog, both pulling each other continuously. Sometimes, the man pulls the dog and, the rest of the time it is the dog which pulls the man. One wonders whether the man owns the dog or the dog owns the man.

But of all the morning walkers, I like the man with a walkman, who enjoys his musical walk, oblivious of everything else. I don’t envy him even a bit, since I walk with my own walk-woman, my sweet and lovely wife, Neelima. Short of singing to me during the morning walk, she does everything else, like updating me on the latest in neighborhood news, film gossip, political commentary, and the like. With such a sweet morning, who is afraid of the day?


(First Published in the Times of India, Edit Page, on 24.02.2001)

The Ad Mad World

By Pawan Verma

Competition in the market place is fast changing the face of the Indian life insurance industry. Gone are the days when you could find an insurance agent with his hands in his own pocket. Being an industry insider, I am also aware of CEOs whose eyes earlier sparkled talking about plunging necklines and rising hemlines. Today, they have all developed hazy eyes and long faces, all the time brooding over plunging top lines and rising solvency margins.

During the earlier decades, competition was best reflected by the Cola companies and their cola wars. But, the new century belongs to the insurance companies and their Ad wars. And it is not the meek and the humble who will inherit the earth, but the ones who make the most noises, grabbing maximum mind share, but incidentally, at the same time, making life difficult for the industry regulator.

For a student of marketing, it will be quite interesting to research a topic like, “Insurance Ads ke Side Effects”. One may not be sure how much the sale of its insurance policies went up when a company stormed the print and electronic media with its Ads for Instant Insurance, but, we all know that the sale of instant coffee and instant food like burgers, went up drastically during the period. Likewise, the Viagra producers were the happiest lot, when a company advertised, “Always Up Never Down”, obviously referring to its investment returns.

However, this is just the trailer. As the industry moves on and competition gets tougher, the fight for customer mind share is going to be more intense and the voices more shrill. No longer are the Ads going to be simple and innocent, like, “Jeete Raho” or “Life mein hamesha rahen taiyar”. There is definitely going to be more spice and action, pricks and punches in the Ad speak of the companies.

Consider, for example, this sample of a future Ad war and judge for yourself :

Company A comes out with a tried and tested Ad line : “We cover your risk from Life to Death”
Company B would try outdoing it : “We take care of you from Cradle to Grave.”
Company C will further expand the scope of cover : “Risk covered : from Womb to Tomb”
Company D would apparently have the final word, “We cover your risk from Sperm to Worm”.
But if you thought that this could be the last word on the subject, you are mistaken. Company E would expand the scope further and announce, “Risk Insured – from Erection to Resurrection”.

So what, you would say, the General Insurance industry is already having an Erection All risk Policy and it is doing well in the market. But no, my dear, life insurance is different. I am afraid, the industry regulator would have a tough time, working overnight, watching the promise and the performance.