Middle income group to lead insurance growth, says Ficci

Our Economic Bureau

New Delhi, Oct 14: The middle class in the country remains the beacon of hope of the post-liberalisation insurance industry, a survey of the operational companies by the Federation of Indian Chambers of Commerce and Industry (Ficci) showed.

According to the survey, 75 per cent of the respondents felt that the middle income group would lead growth in a year’s time. They felt that this segment would register a growth of over 10 per cent and whereas the high-income category would register 7-10 per cent. The lower income group may account for just 2-5 per cent of business growth, the survey found.

As for the rural market, the survey revealed that 90 per cent of the respondents felt that the rural market offered viable business opportunity, but 80 per cent saw a huge problem in regular collection of premia. Sixty per cent were of the view that claim settlement could also pose a huge problem, while 70 per cent agreed that rural mindsets would need to be changed.

Still, 70 per cent respondents said they planned to peg their rural business targets at levels higher than those stipulated.

A positive sign for the insurance agent community was the unanimity among insurers that quality agents in large numbers were required for an effective sales force and networking. Training of these agents and a motivated sales team was high on the agenda of each of the players.

In line with the assurance by the regulator that a higher foreign equity component could be allowed down the years, 70 per cent of the respondents were of the opinion that continuing the 26 per cent limit for long would weaken the highly capital-intensive sector. A majority of them favoured at least 49 per cent permissible foreign capital because of the high funding needs of the long-gestation insurance activity.

Brand-building also was stressed by most, though the need for consumer awareness was also accepted by a considerable number. Most intended to go for niche targeting, while at least 50 per cent voted for incentives to be given to customers through tax benefits.

Bancassurance was also regarded by 90 per cent of the new entrants as an important component for distribution purposes, but 70 per cent felt banks lacked the requisite expertise.

As for health insurance, two-thirds of those surveyed feared that lack of necessary infrastructure and problems of distribution could be major obstacles.