'Customer-centric biz way forward for insurance'

Policy intervention by the regulator, pushing product reforms and universal access could aid insurers achieve a higher growth rate, the Confederation of Indian Industry (CII) said.

A CII report, India Insurance Vision 2025: Building a $250-billion Customer Centric and Value Creating Industry, said the insurance industry was the 16th largest market and was expected to be one of the top 10 markets by 2025.

The report, in partnership with McKinsey & Company, looks at the state of the industry, its evolution, key trends that will shape the industry in the next decade and the potential evolution.

The last few years have been challenging for the industry, with declining growth in life insurance premiums and significant challenges in non-life profitability, the report said. This was driven by a combination of macroeconomic factors and structural challenges inherent in the industry. However, it said an improving economy with potential regulatory reforms and concerted action by the industry players can usher in an era of significant growth and value creation. Overall, the insurance industry in India (across life, general and health) can be as large as $250 billion (Rs 15.6 lakh crore).

"With government's reformative drive and resolve, the industry can jointly achieve the vision of building a customer-centric and value-creating industry over the next decade," said Chandrajit Banerjee, director-general, CII.

The report has recommended an inclusive, progressive growth for the industry over the next decade. This will enable the life insurance industry to grow at 12 per cent compound annual growth rate (CAGR) over the next decade to reach $160 billion-$175 billion (Rs 9.98 lakh crore-Rs 10.9 lakh crore) and general insurance to grow at 22 per cent CAGR to reach a GWP of $80 billion (Rs 4.99 lakh crore).

The life insurance industry has around 380 million policies (among the largest globally) and pays claims for around 12 per cent of the deaths in the country.

The report said there should be policy intervention by the regulator and it should incentivise long-term behaviour and continue to push product reforms. Further, it said that there should be collected and coordinated action by industry to raise the profile of life insurance for customers and distributors.

The report said that a customer-centric business (moving away from distribution-centric business) should be built.

The general insurance industry in India had witnessed a strong performance with 18 per cent growth between 2005 and 2014 and is now a $13-billion (Rs 81,120 crore) industry, breaking into the top-20 industry globally.

The report said however, the interplay between various related elements - trust deficit between consumer and industry participants, largely price-driven competition as well as action of other stakeholders such as policymakers, regulators and other related stakeholders - has resulted in under-performance. For this, it said the players should provide universal access and coverage and deliver returns to shareholders.

Similarly, for healthy insurance it said an effective health insurance system was pivotal to ensure a "healthy" India; given rising non-communicable diseases, unabated medical inflation, low government spend and high out-of-pocket expenditure.

The report said the industry has witnessed rapid growth in the last decade (30 per cent CAGR versus 14 per cent life, 18 per cent non-life). But, overall penetration is still low due to poor coverage of the "individual" through retail schemes, which is critical given the population structure (very high share of self-employed).

The report added that the industry will need to build common infrastructure and individual players will need to continue investing in distribution and upgrading technical capabilities.