 "Expect a mixed bag in insurance sector this year")
In 2014, general insurance companies are optimistic about touching new targets. However, life insurers expect a slow pace of growth as they move into a new product regime.
“As an industry, we have to be prepared for stunted growth for a few more quarters. The silver lining is the changes implemented by the regulator would bring in more benefits to the customers and will also put the industry back on its growth path in the long-run,” says Anuj Agarwal, managing director and CEO Bajaj Allianz Life Insurance. Till then, the focus would be to improve and strengthen the distribution channels, Agarwal adds.
In 2013, Irda introduced the crucial reform enabling banks to become insurance brokers. This was to ensure the bank branches across the country would be able to assist in selling insurance, increasing penetration. With the finance ministry also giving a directive to public sector banks to become brokers, this is a change that is expected to set the tone for insurers’ business growth.
Year 2013 was also marked by uncertainty with the new product guidelines for traditional life products being delayed and then implementation postponed to January.
Says Amitabh Chaudhry, managing director and CEO of HDFC Life, “If there is one word that describes what the life insurance industry has experienced over the past four years, it is uncertainty. It will not be wrong to state many of the changes were generated not from within the industry but forced by regulatory changes (for good reasons) and macroeconomic conditions.”
According to Chaudhry, three key factors will determine how the life insurance segment performs in 2014 – inflation, revival of the distribution engine and acceptance of new products by consumers.
Traditional product guidelines came into force from January 1. These norms have made changes in products structures and surrender benefits and have made the policies more transparent.
Companies such as Bajaj Allianz are also increasing their customer services. The firm has introduced features such as mobile apps, self-help portals, automated SMS alerts, ‘service on wheels’ to provide door-step services. Similarly, Tata AIA Life Insurance has taken several technology-based initiatives including mobile applications to help increase insurance awareness and ease purchase.
At a time when the life insurance industry has a single-digit growth in new premiums, 2013 had been a benign year for general insurance companies. With double-digit growth and better rates in motor insurance, there have been new players entering the industry, too.
Rakesh Jain, CEO, Reliance General Insurance, explained: “FY14 has been a year of stability through diversification. We hope the economic scenario to improve leading to arrest in fall of growth rate for the industry. The industry has been adversely impacted by slowdown in the motor sector and corporate business in the past few months.”
The company intends to sustain on profitable growth. This includes the launch of new products, technology enhancement and formulation of a new digital strategy.
Anup Rau, CEO of Reliance Life Insurance, says the performance of life insurance in 2014 will be driven by new product guidelines (that came into force on January 1), open architecture of bancassurance, and agent productivity.
“We believe the new product guidelines are customer-centric and will promote need-based selling and higher life insurance cover. These changes will result in short-term pain, as the Industry and distribution adjusts itself to the new guidelines, but in the long-term it will lead to better quality of business and sustainable growth.”
From January 2014 onwards, most life insurers will be busy re-launching their product suite in view of the new product guidelines.
Insurers are also betting big on open architecture of bancassurance for growth in new premiums. Rau says the open architecture will help the sector leverage over 1,00,000 bank branches for selling products from multiple insurers.
Standard proposal forms will also be mandated from April. Rajesh Sud, CEO and MD, Max Life Insurance said the standard proposal form that is expected to be launched in April 2014 will be a right step towards weeding out misselling. "Even though the process is long, it is a correct step towards ensuring need based sales.," he said.
While the final micro-insurance product guidelines are still to be introduced, insurers are hopeful of some relaxation in the procedural requirements.
“We expect liberalisation in procedures regarding death claim payments to group policyholder members who are insured on a mass-scale in the rural sector and micro-insurance customers. As the sum-assured is low in these cases, it will be in the interest of claimants for liberal KYC (know your customer) norms to ensure they get their claims speedily; else the purpose of life insurance itself may get defeated,” points out Agarwal.
Parliament has failed to introduce the Bill to raise foreign direct investment cap in insurance from 26 per cent to 49 per cent. If passed, this would have helped the industry, insurance executives say.
“Currently, the total capital deployed in the insurance sector is close to Rs 34,000 crore. FDI in this (assuming 26 per cent) is close to Rs 8,700 crore. If 49 per cent happens, the sector stands to gain an additional Rs 7,800 crore as FDI. The industry at this stage needs long-term capital for growth and expansion which only FDI can bring in,” says Rajesh Relan, managing director and country manager at PNB MetLife India.
He is also of the view that conflicting views in issue of banks as brokers could be detrimental. “There are conflicting directions from Irda and the finance ministry to launch broking guidelines in 2014, which could lead the ailing industry into further downward spiral. This could lead to more confusion, increase mis-selling and may not signal sustainable growth for the sector as intended.”
Adapting to the macro-economic scenario will also be crucial, say insurers. G Murlidhar, managing director at Kotak Mahindra Old Mutual Life Insurance, says with respect to adapting to changes in the macro-economy, GDP growth and the impact it has on household savings will be the key. “We will augment such opportunity by maximizing customer value proposition."
With expansion in technological innovations, the focus will also be on introducing technology-based platform for products and services in the insurance space. Rishi Piparaiya, director (marketing and bancassurance) at Aviva Life Insurance says the mobile platform, which is until now largely untapped by insurance companies, will also be explored for superior customer service.
Irda has also introduced various reforms to expand the reach of insurance. It has allowed electronic insurance in life insurance wherein insurance repositories will maintain digital records of customers’ policies.
Puneet Nanda, executive director at ICICI Prudential Life Insurance, says this year has been rather interesting as there have been positive changes in the sector. Right from the products being offered to the way policies are being sold or the way they will be stored, the entire system is becoming more and more customer-centric, convenient and efficient, he notes.
“The regulatory decisions on distribution, products and processes like allowing e-KYC and e-insurance accounts, we believe, will further enhance the penetration of life insurance, thereby helping companies to reach out to a larger part of the population,” he adds.
Despite the slow growth of the economy, general insurance industry was able to arrest losses and reduce its impact on their books. Sanjay Datta, chief of underwriting and claims at ICICI Lombard General Insurance, says 2013 saw the sector take initiatives across the product portfolio resulting in sizeable growth.
On trends in health insurance, ICICI Lombard’s outlook for 2014 says employer-sponsored health insurance cover will continue to rise. On the motor insurance segment, the report also says sports utility vehicles, high-end two-wheelers and light commercial vehicles will drive the growth next year.
“We believe 2014 would be better in terms of growth across the health and motor insurance segment. Apart from macro-economic factors, the industry is poised to enhance its value proposition across the product and service spectrum,” says Datta.