Whether life and non-life insurance companies would be able to achieve Irdai’s suggested growth figures would depend on factors such as underlying demand for insurance cover, macroeconomic growth and inflation going ahead.
The Insurance Regulatory and Development Authority of India (Irdai) has recently circulated “tentative targets” for growth to all insurers in order to increase insurance penetration. This is for the first time that Irdai has prescribed premium growth guidelines for individual companies. It has caused surprise in the insurance industry.
“Irdai has said it really wants to take insurance growth to the next level as insurance remains under-penetrated in India. It has suggested different growth figures for different companies. The chairman is working very closely with the industry. It creates a lot of positivity in terms of growing the business. Higher business growth for every company will ensure higher penetration, But, the future growth will depend on a lot of factors,” said a senior executive at a major life insurance company.
According to industry sources, the tentative growth targets came up after Irdai chairman Debasish Panda met the top brass of the insurers at Bima Manthan, a bi-monthly series of in-person meetings with the CEOs and MDs of insurers. In these meetings, Panda reiterated that the reform journey that has been embarked upon is underway and will be completed in a time-bound manner.
The regulator has suggested increasing the collective premium for the non-life insurance companies to Rs 11.73 trillion by FY27 from Rs 2.20 trillion as of FY22. For state-run general insurers, it has been suggested to raise collective premium from over Rs 75,000 crore to Rs 2.29 trillion during the period, while for stand-alone health insurers, the suggested increase in premium is to around Rs 1.51 trillion from over Rs 20,000 crore. “Irdai likes to see skyscrapers all around,” a senior executive at a top general insurance company told FE.
“Growth targets have been communicated to the companies. But these are aspirational targets like India becoming a $5-trillion economy soon. Yes, this is a target, we all have to achieve it. But there is no compliance for this matter. Meeting these targets will depend on how customers are reacting to different regulatory policies,” the person said.
Notably, the insurance regulator has recently allowed the general insurance companies to design new and customised products for dwellings, micro and small enterprises for fire and allied perils, providing policyholders more options to choose from. It has also permitted general insurers to introduce tech-enabled concepts for the Motor Own Damage (OD) cover in order to offer customers usage-based insurance covers as add-ons to the basic policies of Motor OD.
According to industry observers, companies set their own growth targets at board levels, but ultimately things on the ground take their own shape. There are so many factors involved. Thus, the achievability of the growth targets, prescribed by Irdai for both life and non-life insurance companies will depend on factors like demand growth for insurance covers, economic growth at the macro level, and how customers are thinking about inflation.
“Future demand growth for life insurance products depends on awareness. Regulations can facilitate in terms of giving more operating freedom, allowing more innovations, and allowing more technology. Our per capita income is very different from some of the other economies, and insurance awareness and penetration is also a function of that,” a person cited above pointed out.
A top executive of a major life insurance company told FE that insurers are not currently witnessing high inflation impacting demands for savings products, but the impact could be seen for some of the retail term products.