MUMBAI, 3rd May 2019: Dr Subhash Khuntia, Chairman, Insurance Regulatory and Development Authority of India (IRDAI), today called upon the insurance companies to make use of the tremendous opportunity available to grow the insurance market.
Speaking at FINCON 2019 - 20th Annual Insurance Conference organized by FICCI, Dr Khuntia said, "Many of you look at market share. But I suggest don?t be too bothered about improving market share. If growth is high you don't have to bother about market share. Put your heads together to make the market grow."
Highlighting the huge protection gap in the country, Dr Khuntia said, "It is important that you provide protection to customers." He further added that in a market with such huge opportunities, insurance companies will be comfortable even if their market share doesn't grow.
He added that in the first year of liberalization, India had just five life and nine non-life insurance companies. Both the numbers rose to 15 during the next four years. But during the first five years, only three life and 13 non-life companies reported operating profit. "You must remain financially sustainable," Dr Khuntia cautioned.
He said that currently, there are 24 life and 34 non-life insurance companies. Last year the overall rate of growth of premium was 13 per cent, higher than the economic growth of the country. "India being a young population," this demographic characteristic is expected to continue for the next several years, offering insurers a very good atmosphere in which to operate. Of the life insurance companies, 21 are reporting operational profit compared to 25 in the non-life sector, Dr Khuntia added.
He called upon the non-profitable companies to introspect. "Those struggling will have to change course and see that long-term sustainability is ensured," he said.
IRDAI Chairman announced three initiatives that IRDAI will be setting-up soon. They include (i) establishment of a risk-based capital system: a self-regulating mechanism where those who manage risk better will be allowed to operate with lower capital; (ii) risk-based supervision; and (iii) introduction of IFRS (International Financial Reporting Standard) 17. "I am not in favour of unnecessary control, but would like to have broad regulations, and within that self-regulation on your part," he said.
He also lauded the insurance industry for the high level of talent within and called for it to be harmonized to develop trust among customers. IFRS 17, he informed, has been postponed to 2022 globally. India has also postponed its introduction, but IRDAI needs the help and cooperation of insurers during the preparatory phase prior to its introduction. He assured complete support from IRDAI in working with them through FICCI, insurance councils and other forums that can be created.
Other areas where insurance companies need to pay attention include the protection of policy holders from unfair practices; development of new and innovative products catering to the requirement of the current crop of tech-savvy consumers; increasing penetration to cover the low-income population; and management and mitigation of risk, he said.
Dr Khuntia added that IRDAI is coming up with a regulatory sandbox. He called upon all companies to look into corporate governance standards and expressed confidence that the insurance industry will not run into the kind of problems faced by NBFCs.
Mr Alpesh Shah, Managing Director, India, Boston Consulting Group, said that since the insurance industry in India privatized in 2001, it was now in its 18th year. And like a teenager, its journey was like a roller coaster ride beset with problems, opportunities and challenges. He said, "Chief among these is changing consumer behaviour, across the population. This was brought out sharply in a recent BCG survey where 77 per cent of consumers were willing to consider non-traditional insurance products covering dental, spectacles and jewellery. Moreover, 88 per cent of them were willing to try out new media to purchase insurance. Insurers now have the option to offer personalized, byte sized, bundled products. Can we create such an offering?" he said.
Mr Bhargav Dasgupta, Chairman, FICCI National Committee on Insurance and Managing Director & CEO, ICICI Lombard General Insurance Company Ltd., compared the trajectory of the insurance industry in India to that of a human moving from childhood to teens to youth. "Teens were a special period in our lives," he said, adding that it was a time of taking risks and learning through experimentation. "But the analogy ends there. As an industry if we follow the same norm, we would lose a lot of opportunity," he added.
FICCI MEDIA DIVISION
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