The Budget Proposals for the Insurance Sector are interesting and forward looking. Their objective is to enhance penetration of insurance in our country. Therefore, factors which will enhance distribution and the buying of a policy have been introduced. These will have a positive impact on the sector and its growth.
There are three key proposals which I believe give an impetus:
a) Opening of Branches without IRDA Approval in Tier 2 cities. This assists an organization in gaining speed in implementation. While one has to read the fineprint, this proposal will be welcomed by the industry.
b) Acceptance of Bank KYC norms in purchase of insurance is again a step in the right direction. It definitely enhances the process and purchase of a policy. This initiative accepts that a convergence within the financial sector is beneficial to the consumer.
c) Banks being allowed to participate as Insurance Brokers. From a customer perspective this is a good move. Banks have a branch network which is large and can be leveraged tremendously for selling insurance. The success of Bancassurance in India over the last decade is an indicator of the customer’s willingness to allow his/her bank’s relationship officer to cross sell him/her a policy based on needs. The participation of Banks as Insurance Brokers strengthens the sector.
These measures will contribute to increasing insurance penetration which was 4.1% of GDP in 2011, having declined for the first time after privatization in 2001.
Dr Anjana Grewal- Senior Professor and Director (Center of Excellence-Insurance), MISB Bocconi
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