Between 2010 and 2012, when the Insurance Regulatory and Development Authority (IRDA) introduced sweeping changes in insurance regulations, the Centre remained in a state of confusion on the impact of such changes. As a result, the insurance sector, which was growing 25% per annum, slumped into three consecutive years of negative growth.
The state of confusion culminated in the former finance minister making a statement that banks should act as brokers for distributing insurance products. Though the announcement remained on paper, it caused substantial damage to the productivity of bancassurance due to uncertainties.
Similarly, the issue of foreign direct investment (FDI) in insurance, and the matter of streamlining of tax issues concerning policyholders and companies as envisaged in the Direct Taxes Code (DTC), which never got close to notification, was a big setback for an industry that requires stability and clarity on government policies for steady and consistent growth.
In such an environment, the industry remained clueless about its future, and its productivity suffered year after year.
Now with a new government at the Centre, the sector can expect speedy clearance for raising of the FDI cap from 26% to 49%. The new government may depend heavily on the insurance industry to provide long-term funds for infrastructure development, and it could mandate the insurance regulator to be more development-oriented so that the industry soon regains its growth momentum and improves its contribution to GDP by at least 1-1.5%.
The new government is likely to monitor public sector insurance companies as these firms will have to shed complacency and work in an environment of accountability.
Prime Minister Narendra Modi has demonstrated as chief minister of Gujarat that desired goals can be achieved through meticulous planning and uncompromising execution. He would expect development to happen fast and the benefits to percolate in real, specific and measurable terms. In such a scenario, it is likely that the insurance industry will get what it wants, but it will also be expected to deliver in a manner and magnitude never seen before.
Industry leaders, both in life and non-life segments, must quickly articulate what they expect from the new government for long-term healthy growth before unilateral decisions are taken by the ministry and the regulator.
In fact, the industry fora, like the Life Insurance Council and the General Insurance Council, must be proactive in dealing with those who would matter in the new regime, or else they will continue to do damage control instead of proactively promoting the interests of the industry.
The insurance industry must emerge as the most powerful catalyst in all development activities of the government.
The writer is advisor (Life) GIC Re and former MD & CEO, Star Union Dai-ichi Life