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EY's global leader - insurance, Shaun Crawford hopes that the Modi government makes it easier for Indian insurers to manufacture more, better quality products. It should also try and make it easier for insurers to sell products. In conversation with Neha Pandey Deoras and M Saraswathy, his biggest concern is too many regulations for Indian insurers and all too quickly. Edited excerpts:
What is your outlook for the Indian insurance sector and how does it compare with its foreign peers?
The Indian insurance industry has been through difficult times in the past few years. I am positive about the new government in India. And I hope that the Modi government will understand that the Indian society needs insurance products. And I hope that the government will make manufacturing insurance products by encouraging manufacturers to make more products, make it easier for insurers to make better quality products and make it easier to sell these products.
The Insurance Bill that proposes to raise the Foreign Direct Investment (FDI) in insurance from 26% to 49% is pending in the Parliament for a long time. Do you see it being passed this fiscal?
The industry has been talking about the FDI cap hike for a long time and we are hoping that it is passed. It is an important step since it will enable insurers from abroad to bring money into the country and also provide competition to Indian companies. Insurers will be able to consolidate and expand by providing more products at a cheaper cost.
What are your concerns about the Indian insurance industry?
The first concern for the insurance industry is too may regulations. This stops insurers from making right kind of products. It also control insurers' capital and supply chain expenditure. Additionally, individuals in India are not comfortable buying insurance products. Therefore, we need the right amount regulations and in right areas. What happened in the last few years was too much, too quickly. This made it very expensive for insurance companies to adapt to the changes made. Lastly, there is a need for stability on the regulatory side. We've seen too many regulatory changes.
What more does the Indian insurance regulator need to work on?
The Insurance Regulatory and Development Authority (Irda) has been listening to the views of other Indian regulators. Instead, Irda may learn from other countries' insurance regulators' mistakes. Like experiences of America and Europe will help India do even better on regulations. Right now, Irda is not encouraging enough for insurers and has too much on its plate.
When do you see the pension products market growing in India?
The problem in India is that pension is not compulsory and the government does not have money to fund retirement saving for individuals. Australia has probably been the best in tackling this problem. Additionally, when families stay together money can be pooled in and (retirement) cost can be controlled. But these days families break up thus increasing the government's cost on retirement even more. I would expect the Modi government to encourage people to buy long term retirement products. But this market should grown soon.
There has been a lot of buzz about the online insurance market. Do you see a growth opportunity there?
Selling life insurance online is very difficult. While there is a growth opportunity there, it is an arduous task to push people to shop online. Maybe making a compulsory to buy online proposition could boost online sales.
Do you think Indians can be sold life insurance only as investment-cum-insurance products and not as pure term cover? Because Indians are always for returns from whatever they put money in.
In other foreign markets, individuals are more interested in term policies than other kind of policies. So is the case in low interest markets like America where people don't feel the need to buy investment policies. In India, people buy investment plans because they don't know what they buy. They only see returns coming but never see than returns come at a cost. If Indians could understand that they pay high charges for small returns, even they would have bought term plans.
Going forward, do you see Indian consumers picking up more of benefit products and not indemnity products on the health side?
Yes, I also see potential health insurance being inclined towards benefit plans as opposed to indemnity plans. That's because they feel hospitalisation plans are very complicated. And the reason behind that is that they are not explained that hospitalisation plans offer extra benefits. Individuals need to be explained what kind of extra benefits come with indemnity plans. There also needs to be transparency on the charges for the extra benefits.
