Life Insurance Council, the industry body of life insurers in India is currently actively assisting Insurance Regulatory & Development Authority (IRDA)’s innovative initiative of entrepreneur-driven alternative distribution channel – the creation of ‘Insurance Marketing Firms’ (IMFs), with an objective to bring Insurance at the doorstep of the customer, and this in turn would help Life Insurance industry attain greater heights.
This unique concept of Insurance Marketing Firm (IMF), which is seen as a game-changer move in the Indian Insurance industry, aims to encourage entrepreneurial spirit in the minds of intermediaries – fomenting perpetual succession and attractive career growth options besides enabling employment opportunities to fellow Indians.
The above initiative would encourage formation of around 1,000 Corporate / Limited Liability Partnership (LLP) Entrepreneur-driven IMFs across the country, and help enhance insurance penetration, increase household financial savings, besides enabling employment opportunities to fellow Indians. These IMFs would be empowered to sell insurance products of multiple insurance companies and also offer other financial products to cross section of customers.
The IMFs is yet another significant step in reaching out to large retail customer base with need-based Insurance solution, after the new product guidelines of IRDA came into existence from January 1, 2014 which has enabled the launch of almost 375 products by Insurers, to Indian life insurance customers.
Addressing a press conference in Hyderabad here today to discuss “Indian Life Insurance Industry: Trends & Opportunities”, Rajesh Sud, Chairman, Life Insurance Awareness Committee of Life Insurance Council said: “This unique distribution channel through IMFs would not only reduce cost for Insurers and thereby create value for the stakeholders, but would also offer bouquet of other financial service products like Mutual Funds, Annuities, etc. and would serve as an interface between various financial institutions and customers.”
Mr. V. Manickam, Secretary General said: “We, at Life Insurance Council, are assisting IRDA’s initiative by organizing seminars at various key cities in the country – we have already conducted seminar in Mumbai, Hyderabad, Chennai and Kolkata and two other cities in Bengaluru and Delhi would follow suit.”
“We are actively following IRDA’s vision to have at least one Insurance Marketing Firm in a district, which would cover a population at least 1 million,” Mr. Manickam said.
Favorable Indian demography –the insurable population is expected to grow to 75 crore and life expectancy to 74 years by FY 2020, would help to accelerate spurt in the preference for Life Insurance. Thus, Life Insurance, which is the second most preferred financial instrument, would drive the growth in Net Household Financial Savings to an estimated 35% of Total Savings in the next seven years, as compared to 26% in FY10.
The Life Insurance industry is expected to record a CAGR of 12-15% over the next five years and the Life Insurance Penetration measured as the % of Insurance Premium to Gross Domestic Product (GDP) is expected to grow to 5% by year 2020 from current 3.2%.
“The lean phase of the Life Insurance industry is almost over. With favorable demographics, new products launches on the roll, industry is expanding its operations and is infusing efficiencies which would bring significant growth story in India,” said Mr. Manickam.
Life Insurance Council is also optimistic that there would be a huge potential foreign exchange inflow of US$10 billion in the near term, when the FDI in Insurance increases to 49%. The increase in the permissible limit would bring in stable capital inflows and help the industry significantly.
Life Insurance industry stands to immensely benefit, with increasing distribution landscape especially in semi-urban and rural areas with the accessibility to Common Service Centers, considered as the cornerstone of National e-governance plan. Currently, around 100,000 CSCs, each of which serve a cluster of 6-7 villages, thereby covering close to 6.5 lakh villages across India. IRDA has already issued guidelines to industry to facilitate tie-up with CSCs and individual life insurance companies are in the process of sewing tie-ups with CSCs. This move would help Insurance Companies to open more outlets/offices in rural and semi-urban areas.
Recently, IRDA has granted license to 5 Repositories and are authorized to open e-Insurance Accounts. These would help to safeguard policyholders to hold insurance policy documents in electronic format and also provide access to the insurance portfolio online.
The Life Insurance industry has witnessed spectacular growth in AUMs, with investments that have been targeted towards deployment of funds for better returns besides enabling nation building activities of the country. The AUMs of Life Insurers has risen to INR 19,40,000 crore as on December 31, 2013 (provisional) as compared to INR 1,94,010 crore in 2000-01, a phenomenal 10 times growth which speak volume about the trust and confidence of fellow Indians on Life Insurance .
The total benefits paid to customers by Indian Life Insurance industry in most challenging period April – December 2013, stood at to INR 1,47,584 crore as on December 31, 2013 (provisional). In addition, there has been a marked improvement in death claims settled by Life Insurers in terms of number of policies as also by amount and the time taken to settle death claims.