How do you see the govt’s decision to allow 100 per cent FDI for insurance intermediaries. What will be its impacts on the industry particularly on the insurance broking front?
The govt’s decision to allow 100 per cent FDI for insurance intermediaries is an enabling provision to encourage international brokers to set up in India. The impact on the insurance broking front could be that there will be global transactions and international best practices brought into the country, with no pressure of local partnerships.
How do you see the government’s decision to review FDI cap of 49 per cent in the overall insurance industry?
The decision of the Government to review FDI cap needs to be made along with a revisiting of the Indian ownership regulations, to enable a fair playing ground, with board control.
What kind of FDI limit you want in the insurance industry, either 74 % or 100%?
The FDI limit could be made 100%, encouraging international players to set up in India and expand their foot print, with their own long-term strategies and best practices. However, adequate provisions will need to be made to safeguard the Indian customers against the adverse effects, if any, of the FII’s international businesses.
Do you think raising FDI limit would attract more players to the Indian insurance industry? Does the sector have scope for more players?
Raising FDI limit will provide opportunities to existing players as well as to new players. The provisions could encourage more niche opportunities.
Do you expect consolidation in the sector after higher FDI is allowed in the sector?
In my opinion, higher FDI may achieve the objective of strengthening the current company’s investment and mitigate the requirement for immediate consolidation. However, it could also enable consolidation and provide an opportunity to companies who want to exit the market.
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 your suggestions to the panel on reforms required for the Indian insurance industry?
I believe that this is the stage that the regulators need to consolidate and streamline all the regulations to make them relevant for now and the future. The spirit and objective of the regulation needs to be emphasized to ensure there is no dilution through adherence to the letter by ingenious interpretation.
IRDAI must define a niche for the insurance industry, basis the customer requirements and the unique value addition that insurance brings to the customer. The comparisons with the banking and mutual fund industry are not holistic and can be misleading to the customer.
Insurance, in its simplest form is a risk management technique. There are three types of risks that the life insurance industry helps to manage:
1. Risk of Mortality & Morbidity (Dying earlier than expected & falling gravely ill)
2. Risk of market volatility (Returns guarantee and long-term investing)
3. Risk of Longevity (Living longer than the average life expectancy)
These risks are addressed through protection products, long term investment products (guaranteed or market linked) and pension/annuity products. The regulator needs to establish this niche position that is not served through any other industry. The industry needs to be empowered to deliver the customer requirements through enabling regulations with a focus on the customer value.
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?
Yes, I certainly believe that there has been substantial change. The range of products launched cover the entire lifecycle of the customer and there has been a lot of effort made to educate customers. I believe there is more work to be done in getting customers to understand that an insurance policy, like any other product/service has certain Dos and Don’ts and the customer must fulfil his/her side of the policy terms and conditions to get the defined benefits. E.g., letting apolicy lapse and then not receiving the benefits.
Are customers now favourably disposed towards insurance products?
On a relative basis, there has been an improvement in insurance awareness. However, there is still a tremendous amount of work to be done.
How the Indian insurance industry should prepare itself for a Rs 5 trillion economy?
The regulator has taken initiatives in terms of revised product regulations, introduction of more distribution avenues and introduction of sandbox regulations. These will go a long way in adapting products, process and distribution to meet the rapidly evolving needs of customers and create an integrated ecosystem of products, services and benefits.