The insurance sector is still under-penetrated when it comes to the lowest strata of the pyramid. The Insurance Regulatory and Development Authority (Irda) is taking rapid strides towards spreading the concept of insurance to this segment. Irda chairman J Hari Narayan, tells FE’s BV Mahalakshmi and
Darlington Jose Hector that the sector has to build more innovative financial products and spread better awareness .
Why is the sector still under-penetrated in the country compared to other countries? How do you plan to increase the awareness levels at this juncture?
The biggest problem is that insurance is sold as a product here. The fundamental focus should not be on returns, but safety. Insurance comes at a time of emergency and acts as financial security. Insurance is actually a wealth creator, but if it is not handled well, it becomes a wealth destroyer. India is still under-insured and the masses are not used to the concept. However, it has been improving in the recent times. We have spent about R15 crore on education campaigns through various media.
Besides, as regulators, we are working with NCERT to evaluate and educate right from the academic levels. Our aim is to promote fairness, transparency and orderly conduct in financial markets while dealing with insurance and build a reliable management information system to enforce high standards of financial soundness among market players.
What are your views on discounts offered by general insurance companies?
Following de-tarriffing, general insurance companies have been offering huge discounts on insurance products to tap new customers. For 2010-11, the underwriting losses of the domestic general insurance companies were close to R10,000 crore. In portfolios such as fire, the discounts have been as high as 70%. Almost all companies are underwriting losses.
What steps have been taken to protect the interests of policy holders?
We want to bring about speedy and orderly growth of the insurance industry and provide long-term funds for accelerating growth of the economy. This would include setting up and promoting high standards of integrity, financial soundness, fair dealing and competence to reduce speedy settlement of genuine claims, prevent insurance frauds and other malpractices, and put in place an effective grievance redressal machinery. The regulatory authority is here to take action where such standards are inadequate or ineffectively enforced and bring about optimum amount of self-regulation in day-to-day working of the industry consistent with the requirements of prudential regulation. One such recent move is stricter guidelines for unit-linked insurance plans (Ulips).
What is the status on insurance claims in the sector? Is there a mechanism for faster clearance or settlements?
The complaints have gone up from 11,000 to 20,000. We are working out plans to give more teeth to the ombudsman for faster clearances as there are certain limitations at present. We want to improve the present systems in-house and are in talks with the stakeholders to reduce inordinate delays. On the other hand, there has to be a real innovation in designing new products and not a copycat version of an existing product. We are also thinking of reducing the product clearances over a period of time from the current four-month period.
How do you view growth in the life and general insurance sectors?
On an average, the general insurance industry is growing at 25% and health insurance at more than 30%. It is a fact that life insurance has grown more than general insurance. In the next 2-3 years, we will see greater demand for health insurance products with increasing healthcare costs. The public is also interested in long-term products with higher value proposition. We see growth in pension markets with more people-friendly products.
