How do you see the govt’s decision to allow 100 % FDI for insurance intermediaries? What will be its impacts on the industry particularly on the insurance broking front?
Government’s decision is a welcome move. It will help more global capital and expertise to flow into the sector. Existing foreign players can increase their shareholding and at the same time new entrants can come in. This may also trigger some consolidation in the broking industry as we have more than 400 registered brokers.
How do you see the government’s decision to review FDI cap of 49 per cent in the overall insurance industry?
Many foreign insurers increased their stake in their JVs when FDI went up from 26% to 49% few years ago. Some of them have exited the Indian market as well. If the FDI goes up beyond 49% the most important question to answer is how do we balance ownership with control. Anyone investing beyond 49% would want to have control, so the key question to be answered will be who owns control.
Do you think raising FDI limit would attract more players to the Indian insurance industry? Does the sector have scope for more players?
The life insurance sector has not seen any new player emerge in the last few years as many existing players have spent substantial capital but have not been able to scale up or even break even. The gap between the top 6 or 7 players and the rest is widening. I am not so sure if raising limit will usher new players in.
On the Non-Life front, in both General and Health Insurance, many new players have emerged. Also, several PE players have put capital in both existing and in new companies. There has been a lot of M&A activity as well.
Hence, opening up to 100% FDI may trigger a fresh wave of consolidation and change of shareholding. Many players who would want to use digital technologies to disrupt the industry may want to get in. Having said that, the sector is also getting quite crowded and already there is severe competition in the sector.
Do you expect consolidation in the sector after higher FDI is allowed in the sector?
Most certainly, both in Life and Non-Life.
Govt has formed a high-level panel under IRDA chairman SC Khuntia to bring about wide ranging fresh set of reforms in the Indian insurance sector? What are you suggestions to the panel on reforms required for the Indian insurance industry?
1. Making the product approval process more simple
2. Innovation Sandbox
3. Risk Based Capital
4. Mandatory KYC for GI and Health products
5. Moving from rule-based regulation to Principle based regulations
These Are some of the areas work in already in progress.
Do you think after two decades of liberalisation of the industry has achieved its desired results? Which are the segments where the industry has succeeded and where it has failed?
India has grown to 1.75 lakh crore market in non-life and is set to become a 4-lakh crore market soon. Listing of the three large life insurance companies, GIC Re, New India Assurance and one in the private sector has brought in more visibility to the industry and has also paved the value creation. Penetration has gone up but we are still at 3.7%, which is way below the 6% world average.
Private car insurance is reasonably well penetrated. In two- wheeler and commercial vehicles, the uninsured population of vehicles outnumbers the insured population.
Health insurance has grown at > 20% CAGR over the last 5 years, we need to offer more customised and innovative solution.
Awareness on the importance of insurance is still low and this is one of the reasons that the insured assets as a % of total loss in catastrophic events is very low.
Are customers now favourably disposed towards insurance products?
Yes, they are. Industry continues to grow at 12 per cent or more. However, as mentioned, we have lot more work to be done on the Retail side in various segments in terms of building awareness.
Many episodal cover based products and covers which offer protection to digitally savvy customers making online purchases or using platforms for travel, cab rides etc. are also expanding the market and spreading usage.
How the Indian insurance industry should prepare itself for a Rs 5 trillion economy?
Insurance is an important cog in the wheel of growth. 1% increase in penetration in insurance has a multiplier effect on GDP increase. Also, increase in insured assets reduces the burden on people and government during catastrophic losses which leaves more room for spending on other areas which can provide growth.
Agenda for the industry is to increase awareness and penetration, use new age technologies like AI, Blockchain, Robotics Process automation, etc. to increase efficiency, productivity, risk selection, fraud prevention and loss minimisation. Make customers experiences the value proposition of protection by focussing on customer delight in claims settlement.