Indian Insurance Sector has come a long way and there are still many issues and challenges that need to be dealt with in order to ensure an overall healthy growth.
Economic Times organised the Insurance Summit 2011, inviting some of the best names in the industry to share their views on the key challenges and opportunities in this sector.
J Hari Narayan, Chairman, Insurance Regulatory and Development Authority (IRDA) said that the industry has to win the confidence of the public. It is important to first address the policyholders’ grievances before educating and telling them why they require insurance.
India has sought a full-fledged Financial Sector Assessment Program by IMF and World Bank which is an internationally accepted standard in insurance sector, banking and securities sector. IRDA Chairman said that broadly there are 28 principles and in 2007, we were compliant with 5 of them, largely 8. He added that recently it was found that we were compliant with 22 of them. The report should be available by the end of this year.
Speaking on the rapidity of regulatory changes, he said that some of them are corrective actions and the insurance sector in India has to win the confidence of its people. Earlier, products which were sold as pension were nothing like a pension plan, so there was a shrinkage. The second set of regulatory changes for the future is:
1) Creation of insurance depositories or Demat for increasing transparency. J Hari Narayan said that IRDA has selected 2 parties as of now for creating depositories which should be up and running in a few months.
2) Outsourcing: which ought to yield significant savings
3) Information to be made available to the consumers: Insurance Information Bureau (IIB) has been formed for efficient functioning of the insurance sector, companies, as well as for protection of the interests of policyholders. It is necessary that reliable, timely and accurate data is collected, processed and disseminated by an independent body.
J Hari Narayan also said, “The last thing which really concerns me is Pensions. There is considerable lack of clarity as most people think 'Annuity' is a form of 'Pension', which is not true. Also more than 90% of all Pensions is with LIC. That is too much of a risk to be allowed to continue. Other companies must pitch in as the concentration risk is enormous. These companies should actually provide life annuity schemes as well. They should manage accumulation as well as deaccumulation. As a society, the need for Pension Plan will only increase as people become more aware and families become more nuclear."
Addressing the need for various distribution channels, he said that there is no doubt that it is the essence of insurance. An army of agents as many as those in India is unheard of in any other country. These insurance agents get very less commissions and only 5% to 6% of them have made it to the top for a comfortable livelihood.
Management has developed a way of looking at the topline growth and each year, they look at new business premium. Renewal premiums are the underpins which need focus, else the sector is not going to benefit.