 "BS Insurance round Table: 'Listing of insurance firms to become a reality'")
Listing of insurance companies in the country will soon be a reality, said the panelists at the Business Standard Insurance Round Table here on Thursday. Finance Minister Arun Jaitley said in the Union Budget 2016-17 that public sector general insurance companies would be listed, and hopes have been raised for the first listing of an insurance company in the industry.
G Srinivasan, chairman and managing director, New India Assurance said that the listing process was possible in a short span of time. "While we have to go through the process, all four public sector insurers are in a position to list, though it could take six to nine months. New India Assurance will be one of the first companies to be listed."
Apart from Srinivasan, the other panelists in the Round Table included HDFC Life MD & CEO Amitabh Chaudhry, SBI Life MD & CEO Arijit Basu, Religare Health Insurance MD & CEO Anuj Gulati, Marsh India Insurance Brokers CEO Sanjay Kedia, and Life Insurance Corporation of India Executive Director Vipin Anand.
Getting insurers to list on the stock exchanges has been an area of focus for the insurance regulator. The regulator has even said that they may nudge insurers to list if they feel a need to do so. Among private insurers, only HDFC Life has announced its plan to list on the markets, though it has not specified any timeline.
Chaudhry said the impact of listing will be huge on existing and prospective customers if it is done at the right price and if the post-listing performance is decent. "The confidence will improve and the trust deficit will come down. As we become owned by customers, we have to sign up for standards which are higher than what we are at today," he said.
According to him, the Insurance Regulatory and Development Authority of India (Irdai) has been pushing for listing because it wants them to stand on their own feet and not depend on promoters. "We are looking forward to it as and when it happens," Chaudhry added.
A lot of expectations have been generated on if and when Life Insurance Corporation of India (LIC) would list. While LIC's Vipin Anand said that this was a government decision and there is not development on this front as of now, he added that the scrutiny that LIC faces as a public sector insurer is much higher than some of the listed entities.
While New India's Srinivasan said listing would help improve the profile and image of the industry, Anand explained that even after 15 years of private sector insurers, LIC continues to be the dominant player in the market and its image among customers remains the best.
"Listed or not listed, a competent performing public sector insurer can hold its own," Anand added.
Adding to this, Religare Health's Anuj Gulati said, "The level of financial reporting we do, the amount of data we put up on our website is no less than what listed entities do."
Distribution of insurance products was an important point of discussion, where there were opposing views on open architecture between insurers having bank partners and those that didn't.
SBI Life's Arijit Basu explained that mis-selling is very low in the bancassurance channel, and is about one-fifth of that in the agency channel.
He said enforcing open architecture at banks would not be beneficial. "We have 80 per cent of our sales through the bancassurance channel, and we are still covering only 30 per cent of State Bank of India's branches. That is the problem. Insurance itself is a nascent activity for banks. If you were to impose something, it would be detrimental," he said. However, he added that bancassurance would eventually go the open architecture way in the next few years, a thought shared by other panelists as well.
In the past, banks have not agreed to become insurance brokers, preferring the corporate agency route. Marsh India's Sanjay Kedia said that any insurer owned by a bank, would not prefer open architecture.
"Open architecture will work for banks that have no insurance subsidiary or partner, but the bank will be driven by which insurance company offers the higher commission and incentives for volumes and will promote those products," he said.
Among distribution channels, agents account for the lion's share in terms of size and number of policies that they contribute to the industry. LIC's Anand explained that to sell insurance to the 300 million young people, there is a need to attract younger generation to the profession. He added that while youngsters are joining the profession, the numbers are much below the demand.
To make India an insured population, the country needs at least five million new insurance agents, he added. There are currently about two million agents.
Insurance also remains a push product, which has led to low penetration and density. Srinivasan said that there is a situation of insurance inertia in the country wherein people are aware of the need for insurance, but are still not buying it.
He stated the example of the recent Chennai floods where there were heavy damages to households. While it was expected that this would motivate people to buy home insurance, the actual data showed that home insurance purchase has not happened.
The solution, according to the panelists, was to have simple products at affordable costs. Citing data from the recent Pradhan Mantri Jan Suraksha Yojana, where millions have been insured in a short span, the insurance executives said that the country needed simple and cheap products that could compete in the market.
Agency channel contribution is at 80% of total business, but attrition rates are rising every day. We need a minimum of five million agents to make India an insured society
Distribution is not an issue, but investment restrictions imposed upon them are. We are not able to compete with other financial products, due to movement restrictions
The organised labour market including segments like SME is still largely uninsured. More incentives are needed for corporates to increase penetration
Penetration rises when high value products are sold, but it does not necessarily mean that the coverage is going up
Insurance inertia is a big problem in India. People know insurance, understand the benefits of insurance but they will still not make the effort of going and buying insurance
There is an inherent bias in the regulatory and policy system that encourages owned distribution by insurers. This will limit insurance penetration
G Srinivasan, chairman and managing director, New India Assurance said that the listing process was possible in a short span of time. "While we have to go through the process, all four public sector insurers are in a position to list, though it could take six to nine months. New India Assurance will be one of the first companies to be listed."
Apart from Srinivasan, the other panelists in the Round Table included HDFC Life MD & CEO Amitabh Chaudhry, SBI Life MD & CEO Arijit Basu, Religare Health Insurance MD & CEO Anuj Gulati, Marsh India Insurance Brokers CEO Sanjay Kedia, and Life Insurance Corporation of India Executive Director Vipin Anand.
Getting insurers to list on the stock exchanges has been an area of focus for the insurance regulator. The regulator has even said that they may nudge insurers to list if they feel a need to do so. Among private insurers, only HDFC Life has announced its plan to list on the markets, though it has not specified any timeline.
Chaudhry said the impact of listing will be huge on existing and prospective customers if it is done at the right price and if the post-listing performance is decent. "The confidence will improve and the trust deficit will come down. As we become owned by customers, we have to sign up for standards which are higher than what we are at today," he said.
According to him, the Insurance Regulatory and Development Authority of India (Irdai) has been pushing for listing because it wants them to stand on their own feet and not depend on promoters. "We are looking forward to it as and when it happens," Chaudhry added.
While New India's Srinivasan said listing would help improve the profile and image of the industry, Anand explained that even after 15 years of private sector insurers, LIC continues to be the dominant player in the market and its image among customers remains the best.
"Listed or not listed, a competent performing public sector insurer can hold its own," Anand added.
Adding to this, Religare Health's Anuj Gulati said, "The level of financial reporting we do, the amount of data we put up on our website is no less than what listed entities do."
Distribution of insurance products was an important point of discussion, where there were opposing views on open architecture between insurers having bank partners and those that didn't.
SBI Life's Arijit Basu explained that mis-selling is very low in the bancassurance channel, and is about one-fifth of that in the agency channel.
He said enforcing open architecture at banks would not be beneficial. "We have 80 per cent of our sales through the bancassurance channel, and we are still covering only 30 per cent of State Bank of India's branches. That is the problem. Insurance itself is a nascent activity for banks. If you were to impose something, it would be detrimental," he said. However, he added that bancassurance would eventually go the open architecture way in the next few years, a thought shared by other panelists as well.
In the past, banks have not agreed to become insurance brokers, preferring the corporate agency route. Marsh India's Sanjay Kedia said that any insurer owned by a bank, would not prefer open architecture.
"Open architecture will work for banks that have no insurance subsidiary or partner, but the bank will be driven by which insurance company offers the higher commission and incentives for volumes and will promote those products," he said.
Among distribution channels, agents account for the lion's share in terms of size and number of policies that they contribute to the industry. LIC's Anand explained that to sell insurance to the 300 million young people, there is a need to attract younger generation to the profession. He added that while youngsters are joining the profession, the numbers are much below the demand.
To make India an insured population, the country needs at least five million new insurance agents, he added. There are currently about two million agents.
Insurance also remains a push product, which has led to low penetration and density. Srinivasan said that there is a situation of insurance inertia in the country wherein people are aware of the need for insurance, but are still not buying it.
He stated the example of the recent Chennai floods where there were heavy damages to households. While it was expected that this would motivate people to buy home insurance, the actual data showed that home insurance purchase has not happened.
The solution, according to the panelists, was to have simple products at affordable costs. Citing data from the recent Pradhan Mantri Jan Suraksha Yojana, where millions have been insured in a short span, the insurance executives said that the country needed simple and cheap products that could compete in the market.
Agency channel contribution is at 80% of total business, but attrition rates are rising every day. We need a minimum of five million agents to make India an insured society
Vipin Anand, ED (Direct Marketing), Life Insurance Corporation of India
Distribution is not an issue, but investment restrictions imposed upon them are. We are not able to compete with other financial products, due to movement restrictions
Amitabh Chaudhry, MD & CEO, HDFC Life
The organised labour market including segments like SME is still largely uninsured. More incentives are needed for corporates to increase penetration
Anuj Gulati, MD & CEO, Religare Health
Penetration rises when high value products are sold, but it does not necessarily mean that the coverage is going up
Arijit Basu, MD & CEO, SBI Life
Insurance inertia is a big problem in India. People know insurance, understand the benefits of insurance but they will still not make the effort of going and buying insurance
G Srinivasan, CMD, New India Assurance
There is an inherent bias in the regulatory and policy system that encourages owned distribution by insurers. This will limit insurance penetration
Sanjay Kedia, CEO, Marsh India