 "Two years of TS Vijayan: The policyholder's man")
Distribution was the key area where the insurance sector was losing out compared to other peers in the financial services sector. When T S Vijayan took over as the chairman of the Insurance Regulatory and Development Authority of India (Irdai) in February 2012, the sector had a poor rate of renewals and lack of adequate contact-points with distributors. In two years, the regulator has introduced several new avenues for the masses to buy insurance products and services, be it through physical distributors or technology. The message from the regulator is clear: Sector growth can only happen when you can reach the prospective customer wherever they are.
With respect to better reach to insurance products and services, Vijayan has taken key initiatives. First, agent attrition, an issue in the insurance sector for long. With low salaries and limited opportunities for career development, insurance agents lost interest in making this a permanent profession. Vijayan allowed companies to appoint agents on their own and gave the flexibility to companies to have their own persistency criteria for agents rather than the regulator dictating these terms. Further, a fixed pay structure has also been favoured by the regulator. The number of life insurance agents in India saw 3.1 per cent growth in 2013-14 after a steady decline since FY11, according to Irdai's recent annual report.
The second initiative is Common Services Centres (CSCs), which have been authorised by the regulator to act as distributors. This would mean the network of 100,000-plus CSCs can be utilised for sale and after-sale services of insurance through trained personnel. Further, Vijayan asked insurers to design simple products so that they could be easily sold by CSC personnel.
Similarly, to boost small-ticket insurance products, owners of small grocery shops, petrol pumps and telephone booths are expected to be appointed as micro-insurance agents. The ticket size of products under this category will also be soon increased by the regulator so that distributors are incentivised.
Banks as brokers is the third area. Vijayan was clear that the best way to boost insurance penetration would be to have more points-of-sale for the product.
Since banks were currently tied up with only one life, one non-life and one standalone health insurer each, it was necessary to open up the system.
Enabling regulations were brought for banks to become brokers, though the banking fraternity is still to explore the broking model suggested by the regulator. Vijayan has also initiated a new channel of distribution called the Insurance Marketing Firms where entrepreneurs could float such firms for the purpose of insurance sales and marketing.
However, banks are yet to explore the broking model since it has not yet been made mandatory officially, though Irdai is considering it. Further, there is a mixed opinion about how the new distribution means like Insurance Marketing Firms would be effective.
Fourth, insurance repositories. At present, there are 330 million life insurance policies and 90 million general insurance policies. Taking this and the fact that customers often lose their policy documents, the regulator started insurance repositories. Here, firms licensed as repositories would digitise insurance policies of customers and also electronically store KYC documents.
Insurance companies, however, admit this is yet to take off in a big-way, though a part of the customers are already going digital. They are also exploring possibilities to look into how costs for tying up with repositories can be brought down.
There are however, several areas where a lot is still left to be done. While the insurance sector has seen growth in premiums and overall business in the past two years, insurance penetration, density and lack of adequate over-the-counter products continue to be areas of concern. Agent attrition also has been an issue with life insurance agents not looking at this sector as a long-term career option, recent steps by the regulatory body including reducing the pass percentage and agent remuneration and persistency norms to stay in business are expected to give a boost to the overall numbers
Motor insurance is an area where the sector has sought de-tariffing in the third party segment where insurance is mandatory under the Motor Vehicles Act. The regulator is still to take a decision on de-tariffing this segment.
With respect to better reach to insurance products and services, Vijayan has taken key initiatives. First, agent attrition, an issue in the insurance sector for long. With low salaries and limited opportunities for career development, insurance agents lost interest in making this a permanent profession. Vijayan allowed companies to appoint agents on their own and gave the flexibility to companies to have their own persistency criteria for agents rather than the regulator dictating these terms. Further, a fixed pay structure has also been favoured by the regulator. The number of life insurance agents in India saw 3.1 per cent growth in 2013-14 after a steady decline since FY11, according to Irdai's recent annual report.
The second initiative is Common Services Centres (CSCs), which have been authorised by the regulator to act as distributors. This would mean the network of 100,000-plus CSCs can be utilised for sale and after-sale services of insurance through trained personnel. Further, Vijayan asked insurers to design simple products so that they could be easily sold by CSC personnel.
Similarly, to boost small-ticket insurance products, owners of small grocery shops, petrol pumps and telephone booths are expected to be appointed as micro-insurance agents. The ticket size of products under this category will also be soon increased by the regulator so that distributors are incentivised.
Banks as brokers is the third area. Vijayan was clear that the best way to boost insurance penetration would be to have more points-of-sale for the product.
Since banks were currently tied up with only one life, one non-life and one standalone health insurer each, it was necessary to open up the system.
Enabling regulations were brought for banks to become brokers, though the banking fraternity is still to explore the broking model suggested by the regulator. Vijayan has also initiated a new channel of distribution called the Insurance Marketing Firms where entrepreneurs could float such firms for the purpose of insurance sales and marketing.
However, banks are yet to explore the broking model since it has not yet been made mandatory officially, though Irdai is considering it. Further, there is a mixed opinion about how the new distribution means like Insurance Marketing Firms would be effective.
Fourth, insurance repositories. At present, there are 330 million life insurance policies and 90 million general insurance policies. Taking this and the fact that customers often lose their policy documents, the regulator started insurance repositories. Here, firms licensed as repositories would digitise insurance policies of customers and also electronically store KYC documents.
Insurance companies, however, admit this is yet to take off in a big-way, though a part of the customers are already going digital. They are also exploring possibilities to look into how costs for tying up with repositories can be brought down.
There are however, several areas where a lot is still left to be done. While the insurance sector has seen growth in premiums and overall business in the past two years, insurance penetration, density and lack of adequate over-the-counter products continue to be areas of concern. Agent attrition also has been an issue with life insurance agents not looking at this sector as a long-term career option, recent steps by the regulatory body including reducing the pass percentage and agent remuneration and persistency norms to stay in business are expected to give a boost to the overall numbers
Motor insurance is an area where the sector has sought de-tariffing in the third party segment where insurance is mandatory under the Motor Vehicles Act. The regulator is still to take a decision on de-tariffing this segment.