Vivek Joshi, Secretary, Department of Financial Services (DFS), for the first time on Wednesday met General Insurance Council and a few CEOs of private sector general insurance companies in New Delhi, to discuss several critical issues having implications for the general insurance sector in details
In view rising incidence of natural disasters causing huge economic losses in the country, government is now keen to encourage Property/Parametric covers to mitigate financial losses due to natural catastrophes.
Vivek Joshi, Secretary, Department of Financial Services (DFS), Ministry of Finance, for the first time on Wednesday met General Insurance Council and a few CEOs of private sector general insurance companies in New Delhi, to discuss several critical issues having implications for the general insurance sector in details.
According to the industry experts, parametric insurance is a small but growing area of the insurance market which sees pre-defined pay-outs triggered if a certain event occurs, for example temperatures remaining above 50 degrees Celsius (122°F) for three days in a row.
Often using satellite or other remote-sensing technology to confirm whether the payout should occur, money can be received more quickly than with traditional cover that may involve loss-adjusters visiting the site to confirm the money owed.
Increasingly being used by financial institutions to help hedge against weather, carbon or commodity risks, technical advances mean it can also be offered to previously hard-to-insure communities in emerging markets.
The global market for parametric insurance is expected to reach $29.3 billion by 2031, analysis from Allied Market Research showed, up from $11.7 billion in 2021.
Reinsurer Swiss Re, previously reported that its global sales of parametric products jumped 40 per cent between 2021 and August 2022.
In India, the state government of Nagaland has taken a parametric monsoon coverage designed by Swiss Re and Tata Aig General insurance for insuring against flooding.
The parametric insurance transaction, backed by Swiss Re’s reinsurance capacity, offers coverage for excess rainfall events that can lead to severe flooding.
The trigger has been constructed using a geospatially gridded dataset, with precipitation levels derived using satellite observation.
Some of the issues that were discussed in the meeting are-
Awareness building through continuous interaction with States under State Insurance Plans to increase insurance penetration and coverage,
-Distribution channel rationalisation in opening up of the agency channel for the general insurance industry to increase insurance penetration,
-Coordinating with State Governments and Ministry of Road Transport and Highways to initiate a special drive to ensure compliance of Motor Vehicles’ Act,
-Collaboration with Ministry of Health for increasing cashless facility and standardization of treatment costs to boost growth of health insurance,
-Encourage adoption of Property/Parametric covers to mitigate financial losses due to natural catastrophes. Devising mechanism to cover the Micro, Small and Medium Enterprise sector,
-Exploring linking of Insurance frauds to the CIBIL score to prevent / mitigate frauds
After fruitful deliberations and focused exchange of opinions on these matters, Joshi directed DFS officials to take them up actively for resolution.
It was also decided that regular meetings will be held with the industry – both private and public sector – so that the growth and development of the insurance sector in facilitated with continuous collaborative efforts.
Some of the general insurers, which had attended the meeting are -ICICI Lombard General Insurance, HDFC Ergo General Insurance, Reliance General Insurance, Tata AIG General Insurance, Bajaj Allianz General Insurance and Digit General Insurance.