Insurance Industry Needs To Consider Open Sales Architecture: J Hari Narayan, Chairman IRDANews Mumbai, India - 06 August 2012
An exposure draft on investments is expected by end of the week suggesting introduction of swaps and hedges in the new norms ~
~ The real growth, challenge and opportunity lies in the non-life insurance sector and companies need to recast themselves to take advantage of it ~
~ Need for other companies besides LIC to give customers choice in annuity provisions ~
The insurance sector is at an inflection point where it faces both hard realities and immense opportunities. What should be the way forwards and what role can the regulator pay in helping the industry while protecting customers. These points were discussed at Confederation of Indian Industry (CII) flagship event, the 15th Insurance Summit with the title ‘Hard Realities and Opportunities in Insurance Sector’.
Mr J Hari Narayan, Chairman, Insurance Regulatory Development Authority (IRDA) said that the industry is at a crossroad, “The insurance industry has today reached an inflection point and we can look forward with confidence to a couple of measures brought in to address issues. An exposure draft that we have been working on with industry representatives on the boundary condition of products will hopefully be up by end of week. The new norms will have provisions like swaps and hedges. We have taken baby steps towards risk based solvency. The exposure draft will have some measures and if we move along that route, we can correspondingly have a look at solvency margins. Conceivably it will come down. The point is to think long term and I do hope that 30 years from now we will look back and say that the inflection point was well managed.”
Referring to performance of the non-life sector, Mr. Narayan said, “The real growth, challenge and opportunity in insurance today lies in the non-life insurance sector in India. The existing insurance companies will have to recast themselves to take advantage of it.”
Mr. Narayan, talked about some radical steps when he said, “To reach the full potential of the industry you need to ask yourself if you will allow agents to work across companies and whether an open architecture is feasible. And shouldn’t we, across companies within the group, share agents.”
At the same time, he stated that the industry needs to remember its core essentials. “The insurance industry can’t merely be pegged on better return of money. Its core remains the area of protection. Going forward the focus of insurance will move towards protection and annuity provision. And the industry will have to move so that LIC does not remain the only company providing annuity. Other players will have to move into the annuity market and give customers genuine choice,” Mr. Narayan said.
Mr. Analjit Singh, Chairman, CII National Committee on Insurance & Pension and Chairman, Max India Ltd. stressed that it is important to remember the three core objectives of the insurance industry i.e. to provide adequate protection, viable and long term saving and employment. He further added, “Currently we are one of the lowest in terms of per capita premium in India which stands at 56 dollars compared to the world average of 364 dollars. We have come a long way compared to a decade back, but the question today is where do we want to be in the next decade and the policies that are needed to go there.”
He rated attrition to be a key problem of the industry even in the middle management levels with a very low average income for a life insurance agent. He wondered if retail insurance is the path one needs to take.
A CII and Ernst & Young Report titled, “Insurance industry: Challenges, Reforms and Realignment” was released by Mr. J Hari Narayan. The report outlines the current issues and challenges faced by the insurance industry and the steps that could be taken to ensure that the industry achieves its potential.
Mr. Sanjiv Bajaj, Co-Chair, CII National Committee on Insurance and Pensions & MD – Bajaj Finserv Limited said, “The action we take today will determine the future of the industry for not just the next few years, but the next few decades. What we need to ask is whether we are really creating quality and products that are understood. When we talk about ‘capital’ we shouldn’t just understand it to be money, but trust and credibility of the players and the industry as a whole. I hope we talk not only about growth but also responsible growth.”
Photo 1 :
L TO R :
Jyoti Vij, Chief – Regulatory Affairs, Corporate Governance & Financial Services, CII
Analjit Singh, Chairman, CII National Committee on Insurance & Pension and Chairman, Max India Ltd
J Hari Narayan, Chairman, IRDA
Ashvin Parekh, Partner, National Leader - Global Financial Services, Ernst & Young Ltd
Sanjiv Bajaj, Co - Chair, CII National Committee on Insurance and Pensions & Managing Director, Bajaj Finserv Limited
Analjit Singh, Chairman, CII National Committee on Insurance & Pension and Chairman, Max India Ltd, J Hari Narayan, Chairman, IRDA , Sanjiv Bajaj, Co - Chair, CII National Committee on Insurance and Pensions & Managing Director, Bajaj Finserv Limited are addressing at CII’s 15th Insurance Summit 2012 in financial capital of India - Mumbai.