The growth of the Indian insurance industry is projected to remain below 5 per cent in the current fiscal (FY 2013-14), according to a CII Survey of 30 leading insurance companies.
The Survey also revealed that the non-life insurance companies are found to be more optimistic in their growth outlook as compared to the life insurance companies with nearly 60 per cent of non-life insurance companies projecting an average growth of more than 10 per cent whereas 50 per cent of surveyed life insurance companies surprisingly projected the growth to be negative for the current fiscal.
The Survey assessed the outlook of the Insurance sector in India while focusing upon the impact of regulatory & policy environment in increasing the insurance density and penetration and on the business outlook of the Insurance companies.
â€śWhile the Indian insurance industry is acknowledged globally to have matured tremendously since the opening up of the sector in 2001, a facilitative and enabling regulatory and policy environment is critical to ensure that insurance companies in India enter the next stage of growth and evolution on the foundation of greater insurance density and penetrationâ€ť, said Mr Chandrajit Banerjee, Director General, CII.
Among the key factors envisaged to help strengthen the insurance density and penetration in the Indian economy, the insurance industry has ranked open architecture of distribution channels as the most important measure, which was followed by removal of cap on acquisition cost of business, and enhancing customer education and financial literacy.
Increasing the FDI cap from current 26 per cent to 49 per cent is viewed as the next major factor to push the insurance density and penetration higher whereas the Standardization of products and faster approvals of File and Use products are expected to have the least impact towards meeting the objective, as highlighted by the respondent Insurance companies.
On the DTC proposals, 60 per cent of the surveyed insurance companies responded that the proposed provisions will have a negative impact on insurance sector. The DTC proposals including an increase in cover multiple from 10 times to 20 times, reduction in exemption limit for life insurance premiums from Rs 1,00,000 to Rs 50,000, Levy of 5% Distribution Tax and an increase in corporate tax rate from current 12.5% to 30% are viewed to have a significant impact in changing the market dynamics for the insurance companies.
On IRDAâ€™s draft Micro-insurance guidelines, the insurance companies, interestingly, seem to be equally divided in gauging the effectiveness of the norms in achieving the larger financial inclusion agenda. IRDA has issued exhaustive draft guidelines to facilitate the penetration of insurance in amongst â€śbottom of the pyramidâ€ť population through comprehensive products which will cover aspects of life and non-life insurance.
Among other major findings, 81 per cent of the surveyed insurance companies are not seen in favour of the mandatory 50 hours of agent training and expressed that the IRDA should consider removing this requirement. Over the years the insurance companies have built up adequate and efficient training capacity within the offices and have also come to recognize the inevitability of continuous training of the sellers of insurance. Within the insurance companies, the recruited agents could be trained by their managers and they could take the existing pre-recruitment exam of Insurance Institute of India for getting license to sell insurance.
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