At a time when the life insurance industry is staring at its worst growth rate, the Insurance Regulatory and Development Authority is playing down the concerns of the sector. R K Nair, member (finance and investments), said at the Businesas Standard Insurance Round Table in Mumbai on Friday that after a number of good years, this was the time for consolidation, and more importantly, orderly growth.
“If we analyse the premium collection for the current year, we see that sales of the unit-linked plans have come down drastically. But sales of pure protection plans or traditional plans have grown significantly. This shows that investment products have suffered, which should not be a concern considering the current macroeconomic environment,” said Nair.
Several issues such as impending regulations on bancassurance, the general insurance industry’s lack of profitability and life insurers’ woes were discussed.
Nair cited figures from the April-December period, whereby the first year premium collection in the life insurance industry is down 17 per cent, compared to the corresponding period last year. “There has been a significant growth in the last 10 years in the life insurance industry and one should put the latest slide of premium collection in perspective,” he added.
Insurance players were of the opinion that in order to promote long term savings in the economy, pension products should be encouraged. However, it should not come with the baggage that they need to invest in annuities only. Instead, buyers of such products should be allowed to use the accumulated sum as they wished to.
According to P Nandgopal, managing director and chief executive officer of India First Life Insurance Company, pension plans, which accounted for nearly 30 per cent of sales, played a key role in promoting long term savings. “Regulator must define the role and roadmap for the life insurance industry,” he added.
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In a bid to increase the penetration of insurance products, insurers called for simpler regulation for individual agents.
“While bancassurance contributed 25 per cent of the premium, the agency network contributes 75 per cent of the premium. There is a need to open the agency framework also. Agents should be allowed to sell insurance products of more than one insurer,” said Amitabh Chaudhury, managing director and chief executive officer of HDFC Life Insurance.
M N Rao, MD & CEO, SBI Life, said, “Bank employees should be allowed to sell insurance products over the counter, and the banking correspondents also should be used to market the insurance products to increase the penetration of insurance in the remote places.”
If growth for the life insurance industry is a concern, it is profitability and low returns which are hurting the general insurance industry. However, with the motor pool being dismantled and prices stabilising, insurers were of the opinion that margins and returns will only improve going forward. “Dismantling the third party motor pool will be a relief for the industry. We are also seeing the prices stabilising in other lines of business. So going forward, returns and margins will improve,” said Bhargav Dasgupta, MD & CEO, ICICI Lombard GIC.
“Many companies have started reporting positive combined ratios, which is an indication that prices are moving towards the right direction. Going forward, the returns and profitability will see considerable improvement,” said Gaurav D Garg, MD & CEO, Tata AIG General Insurance.