Customers in smaller cities to have better access to insurance, courtesy Budget proposals

Customers in smaller cities will have better access to insurance products, thanks to a number of proposals in the Budget 2013-14. Not only will they get insurance policies quicker, but they will also get serviced from multiple players.

In the Budget, Finance Minister P Chidambaram had said that the KYC (know your customer) norms of banks would be sufficient to acquire insurance policies. This means, an individual already holding a bank account does not need to give any other document to buy an insurance cover.

The other proposals in the Budget included allowing banks to act as insurance brokers, permitting banking correspondents to sell micro-insurance, and letting insurers open branches in Tier-II cities and below without the Insurance Regulatory and Development Authority's (Irda) nod.

P Nandagopal, MD & CEO, IndiaFirst Life Insurance, said: "While there are no additional tax concessions as expected, the big announcement is the proposed open architecture for bancassurance through the broking route. In the long-term, this would deepen the distribution reach of the banks in offering a wide range of insurance products. We need to check the details and also take steps to see the broking model does not result in excess distribution costs for the insurance companies, which are already reeling under the pressure of thinning margins."

According to Amarnath Ananthanarayanan, CEO & managing director of Bharti AXA General Insurance, the KYC relief will make compliance simpler and enable better risk management and fraud control.

Insurance penetration in India is among the lowest in the world. According to industry players, allowing banks to sell micro insurance products will increase insurance penetration in India. "KYC would also facilitate convenience and seamless on-boarding of customers," said Sandeep Bakhshi, managing director & CEO of ICICI Prudential Life Insurance.

Increase in insurance density will benefit customers, according to Miranjit Mukherjee, CFO and senior vice-president (finance) at Tata AIG General Insurance. He said that since general insurers will be able to offer insurance covers to customers in Tier-II and Tier-III cities, people will be able to protect their home and assets from future unforeseen risks.

The Budget also proposed that group insurance products be offered to homogeneous groups such as self-help groups, domestic workers' associations, anganwadi workers and teachers, among others. G Murlidhar, managing director of Kotak Mahindra Old Mutual Life Insurance, said that this will help increase penetration and provide insurance to more vulnerable people who need insurance cover the most.

The Budget also provided for insurance cover for individuals below the poverty line. The government-sponsored health insurance scheme, Rashtriya Swasthya Bima Yojana (RSBY), covers 34 million families below the poverty line. It will now be extended to other categories such as rickshaw pullers, auto-rickshaw and taxi drivers, sanitation workers, rag pickers and mine workers. Further, a comprehensive and integrated social security package for the unorganised sector has also been proposed.

Tata AIG General Insurance's Mukherjee said that by widening RSBY's scope, the government has encouraged this segment towards a financially secure path. "We are a current participant in the RSBY scheme and we believe that social schemes such as these will aid the estimated 40 per cent populace in India who lack access to the simplest of financial services."

Government-owned insurers have also been made liable to increase insurance penetration. It has been proposed that all towns with a population of 10,000 or more will have an office of Life Insurance Corporation of India (LIC) and at least one public sector general insurance company by March 2014. Insurers also have given their nod to this scheme.

A senior executive of a public general insurer said that they will be able to reach more individuals by setting up more micro offices across the country. According to him, there are approximately 2,500 locations in India, which have not been covered by any public insurer. "With our employee strength and distribution bandwidth, it is not at all a difficult task for all public (life and non-life) insurers combined, to serve these regions," he stated.