India's insurance grievance data shows the machine, not the man

The Insurance Regulatory and Development Authority of India (Irdai) wants a public register that ties every insurance policy to the individual who sold it. Chairman Ajay Seth laid out the idea at the silver jubilee gathering of the insurance brokers' association in Delhi last week. The logic is straightforward: when a customer is pushed an expensive endowment plan when a simple term cover would have done, the responsible seller can be identified and his record can follow him from employer to employer.

On the surface, this looks like accountability. It costs nothing to the distribution business because it threatens no existing stream of commission. A database that records who did what is the easier half of reform. The harder half would cut the commissions that pay for the bank counters, the broker networks, and the entire apparatus through which most policies reach customers.

It is not difficult to guess which half will be implemented first.

Consider a parallel. Some carmakers now sell vehicles without a spare wheel, offering only a puncture repair kit. Acceptable in a city, useless on a highway after dark. Nobody proposes a register of the salesmen who sold those cars because the choice was made above their level, to protect a price or a margin. Responsibility lies with whoever set the target, not whoever met it. The idea of a permanent record of each showroom salesman while the boardroom that removed the wheel stays anonymous would strike most people as absurd. Yet a register of insurance sellers does exactly that: it records the name of the person at the desk and leaves blank the name of whoever decided the desk should push endowments.

The agent sitting across from a buyer occupies the same position. He is not the author of the incentive he answers to. He is its executor. A register that captures him, however faithfully, leaves the person who designed the reward out of the picture.

This is why the promise that a seller's history will trail him sounds more powerful than it actually is. You can trace executors indefinitely, but the next person hired into the same incentive structure will behave identically. It is the setup doing the work, not the individual.