 "Insurers should focus on sustainable profitable model: Chanda Kochhar")
India’s insurance sector needs to focus on a sustainable, profitable model of growth, said Chanda Kochhar, managing director and CEO of ICICI Bank. The country’s low insurance density is a matter of concern, she added.
“Insurance density level in India is very low, compared to developing nations like Brazil. Similarly, penetration across different income segments is also low,” Kochhar said at an event organised by the National Insurance Academy.
According to the Insurance Regulatory and Development Authority’s annual report for 2011-12, India reported a fall in the insurance density in 2011 — the first time since the Indian insurance sector was thrown open to private participation.
The measure of insurance penetration and density reflects the level of development of insurance sector in a country and is measured as the percentage of insurance premium to gross domestic product.
Kochhar said that while there has been a slowdown in savings and shift to physical assets, the insurance sector is in a phase of evolution. And this is reflected in industry statistics, she added. Sum assured, for instance, has increased over two times in the past five years. On growth drivers, Kochhar said demographic dividend, investment opportunity and technological development are crucial.
According to her, it is important to create more insurable assets. “Various studies have revealed new business profit margins in India are lower than other nations. This is reflected from low persistency and high costs in life insurance,” she added. For the industry to progress, cost efficiency and better use of technology is an important step. Kochhar added that customer focus should be the central theme for insurance.
“There is a change in the demographics. Hence, innovative products to meet customer needs are required. The industry needs transparent products, not just simple products. There is also a dire need to control mis-selling, especially since insurance is primarily sold through third-party channels,” she added.
In his inaugural speech, A K Roy, chairman and managing director of General Insurance Corporation of India, stressed the need for simple products and processes. According to him, risk management should be taught in schools.
Arvind Kumar, joint secretary, department of financial services, pointed out only one-fifth of people’s savings goes towards insurance. “While our savings rate is one of the best in the world, our general insurance penetration is not even one per cent. This is an area where changes need to be brought about,” said Kumar.
“Insurance density level in India is very low, compared to developing nations like Brazil. Similarly, penetration across different income segments is also low,” Kochhar said at an event organised by the National Insurance Academy.
According to the Insurance Regulatory and Development Authority’s annual report for 2011-12, India reported a fall in the insurance density in 2011 — the first time since the Indian insurance sector was thrown open to private participation.
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The 2011 figure stood at $49 (about Rs 2,695), down from $55.7 (Rs 3,063) in the previous year. According to the annual report, there was an increase in insurance density for every subsequent year from 2001.
The measure of insurance penetration and density reflects the level of development of insurance sector in a country and is measured as the percentage of insurance premium to gross domestic product.
Kochhar said that while there has been a slowdown in savings and shift to physical assets, the insurance sector is in a phase of evolution. And this is reflected in industry statistics, she added. Sum assured, for instance, has increased over two times in the past five years. On growth drivers, Kochhar said demographic dividend, investment opportunity and technological development are crucial.
According to her, it is important to create more insurable assets. “Various studies have revealed new business profit margins in India are lower than other nations. This is reflected from low persistency and high costs in life insurance,” she added. For the industry to progress, cost efficiency and better use of technology is an important step. Kochhar added that customer focus should be the central theme for insurance.
“There is a change in the demographics. Hence, innovative products to meet customer needs are required. The industry needs transparent products, not just simple products. There is also a dire need to control mis-selling, especially since insurance is primarily sold through third-party channels,” she added.
In his inaugural speech, A K Roy, chairman and managing director of General Insurance Corporation of India, stressed the need for simple products and processes. According to him, risk management should be taught in schools.
Arvind Kumar, joint secretary, department of financial services, pointed out only one-fifth of people’s savings goes towards insurance. “While our savings rate is one of the best in the world, our general insurance penetration is not even one per cent. This is an area where changes need to be brought about,” said Kumar.