Life insurance sector awaits reforms with hopes of economic growth

May 26 2014, 10:30 IST
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The insurance industry is still some distance away from the premium collection figures it clocked in the year ended March 2011. The insurance industry is still some distance away from the premium collection figures it clocked in the year ended March 2011.
SummaryFY14 saw some pick up in the first year premium collection in the life insurance space.

in infrastructure and Rs 2,20,000 crore into government securities by Financial Year 2020,Ē said Sud.

Recently, IRDA came out with a draft for setting up Insurance Marketing Firms (IMF) in a bid to increase life insurance penetration in the country. They will work like the independent financial advisors and offer integrated financial solutions under one roof. While it is expected to promote entrepreneurial drive they could also help financial services industry tackle the problem of high attrition of distribution intermediaries. While it is a work in progress, it needs to be seen how it shapes up for the sector.

What can the industry do

While there is a lot that is demanded from the government and the regulators, industry insiders say that there is lot that even the insurers can do themselves.

ďI do not think the industry has acted responsibly in the past. There have been complex products that have been there in the market which the investors donít understand and have been mis-sold. The least that the industry can do is to come out with simple products,Ē said Rau.

There is a need to revive the Ulips and experts say that the industry can help itself by encouraging customers to buy the product for the long term as currently the lapsation rates are high. The charge structure needs to be revised in a manner that they encourage distributors to retain the customer for the long term.

The markets have risen and investor sentiments are on rise. It may be wise for the industry and the regulators to chart out a plan to target consumers in good faith and go for mobilizing long term savings that may contribute to the growth of the economy.

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