The Indian life insurance industry is at an inflection point, much like its economy itself. After two successive years of sub-5% growth, India’s GDP growth is finally looking up with RBI pegging it at 5.5% for FY15.
With optimism around a stable government and revival of the stock market, overall sentiment has been positive for a while now. This, coupled with the prospects of a better economic future, is increasing the confidence level of Indians, which, in turn, will lead to a higher appetite for long-term saving products, going forward.
In terms of the year that is drawing to a close, life insurance has undergone a makeover with a series of regulatory developments, such as new product guidelines, norms on banks as brokers and on web aggregators. The industry today has on offer a bouquet of attractive products to serve various life-stage needs. While unit-linked insurance plans have been overhauled with lower charges, traditional products, too, have been revamped to deliver higher value to customers. Both have been redesigned to yield better long-term outcome for the customer and, hence, have become a larger part of a family’s financial plan.
With India’s improved political sentiment and the government offering a conducive environment for reforms, 2015 is likely to be marked by an increase in the penetration of life insurance across the country as well as long-term capital infusion in the industry.
Also, from the reforms viewpoint, the promulgation of the Insurance Laws (Amendment) Bill, 2014, by the President, is a welcome development as it highlights the government’s resolve to move ahead on key reform decisions. From an industry point of view, the approval of increase in foreign capital cap to 49% is good news and should bring in the much-required long-term capital to the sector.
It will also bring in domain capital, which is of critical importance in this phase of growth of the life insurance industry. Additional inflows of capital will allow for greater investment in product and distribution and, hence, increase penetration of life insurance in the country.
The crucial question is how it will impact customers. Increased investments in distribution, product design, technology, service delivery and now channels such as e-commerce will result in better customer value proposition. Tax benefits are among the key advantages of buying life insurance. In Budget 2014, initiatives such as increase in 80C limits from R1 lakh to R1.5 lakh and the marginal increase in personal income tax slab from R2 lakh to R2.5 lakh have also allowed more money in the hands of the customer.
In the days to come, there will be a greater role to play for all stakeholders in the industry — Irda in defining a clear long-term roadmap of the regulatory development of the industry to help the players plan effectively, the government in providing greater incentives to long-term savings and retirement planning and the industry in leveraging these factors with a customer-centric focus to realise growth.
As the new structural reforms set in and the stakeholders and regulators step in to meet the challenges, the life insurance sector will be on the path for significant growth.
A good year
*In 2014, life insurance underwent a makeover with a series of regulatory developments, such as new product guidelines, norms on banks as brokers, and on web aggregators
*The industry today has on offer a bouquet of attractive products to serve various life-stage needs
*While unit-linked insurance plans have been overhauled with lower charges, traditional products, too, have been revamped to deliver higher value to customers
*Both have been redesigned to yield better long-term outcome for the customer and, hence, have become a larger part of a family’s financial plan
*The promulgation of the Insurance Laws (Amendment) Bill, 2014, by the President, is also a welcome development
By Rajesh Sud
The writer is CEO & managing director, Max Life Insurance