While forecasting India’s economic growth during the coming three years, both the World Bank and the International Monetary Fund (IMF) have indicated that India will emerge as the fastest growing economy in the world. Finance minister Arun Jaitley has recently indicated that India’s growth rate could be even higher than 7.5% if the global economy also shows positive trends. He also expects that India can grow at such pace for a considerable period.
Thus, the background in which various sectors have to perform and grow is quite clearly defined. Every sector of economy has to contribute and grow with the same celerity and it is quite feasible in the given environment. The political will that is behind such expectations is surely going to provide a very constructive ecosystem for rapid growth. In this scenario, government spending will go up and public consumption will also grow.
The government’s policy of infrastructure development, social sector spending and rural area development would put more money in the hands of the rural population also. All these according to Jaitley will lead to pick up in purchase power of the people across all sections.
While life insurance grows in proportion to disposable surplus in the hands of individual wage –earners; non-life insurance grows in the same ratio in which goods and services are produced to bolster all segments of the economy. Insurance is therefore very well poised to grow rapidly in the present regime.
Unfortunately, however, the insurance industry in India is not showing proportionate growth indications. The industry has perhaps failed to build up infrastructure for achieving exceptionally high rate of growth. During last five years this industry is known for struggling against so many odds including tough and often stifling regulatory interventions.
The industry also struggled to overcome the setback caused due to adverse public sentiments following allegations of mass-scale miss-selling. But the fact remains that the industry leaders have remained behind others in creating a clear space for their industry in the total economic environment.
Repeating the strategy of the past can produce semblance of growth but cannot propel the industry to such growth as is required to match the growth in the economy as a whole. When economy moves faster, a new set of strategies aligned to new factors emerging in the environment is required; and when the economy grows at slower pace compared to the industry the on-going strategies are required to be religiously followed to avoid falling into the trend. Therefore, today, all segments of the insurance business have to register some resurgence propelled by innovative growth engines.
Every insurer has to introspect whether it has to move faster than the existing pace, whether it has to achieve better service efficiency or whether it has to bring in cheaper and more customer-friendly products.
Something has to be done to break away from the status quo characterised by either slow growth or negligible growth. Distribution being the most challenging part of the insurance business needs fresh approach.
Compared to the best of the time for the industry in India, seven to eight years ago, today he number of distributors, number of employees as well as number of offices are far fewer. Perhaps the industry could not manage to sustain fast growth in difficult times. That was the time when leadership needed to find ways to drive past negative factors with innovative products and distribution strategies. I am afraid, this scenario may leave the insurance industry behind others, in scripting India’s growth story.
Today, whatever good developments are happening in India regarding the insurance industry are those happening
on the government’s initiative.
Six months ago, the Pradhan Mantri Jeevan Jyoti Beema Yojana and Pradhan Mantri Suraksha Bima Yojana were launched taking insurance right to the doorstep of the common man. Recently, the government decided to launch Bhartiya Krishi Bima Yojana to extend the benefit of crop damage insurance to at least 50% of our farmers.
About a year ago government had announced raising of ceiling of foreign investment to 49% and an amended Insurance Act was put in place. Foreign investment of at least Rs 10,000 crore is expected within a year. I believe the best of time for the industry to grow is here and every day lost in effecting the much-needed turn-around is going to prove very costly for the participating players as well as for the regulator.
Continuation of the current dull phase may drag the industry out of favour of the policy makers. Several other industries may grow faster and contribute substantially to the national GDP.
The Telecom Sector Skill Council expects 7 lakh new jobs in the sector in next five years. Will the Life Insurance Council or the General Insurance Council or even the IRDAI tell us what is the employment generation potentiality of the insurance industry in the next five years?
The writer is former MD & CEO, SUD Life