More insurance products for pension space needed: CII-EY report

Too frequent regulatory interventions prevented industry from settling down

Insurers should explore the opportunities in the pension sector by developing relevant products and incentivising stakeholders, said a new report by the Confederation of Indian Industry (CII) and Ernst & Young (EY).

The report titled ‘Indian insurance sector-building growth, building value’ released on Friday at the annual CII Insurance Summit said insurers should solve the cost conundrum by greater use of technology.

According to the report, although both life and non-life segments witnessed high growth, too frequent regulatory interventions prevented the sector from settling down.

First-year premium for life insurers grew at a compounded annual growth rate (CAGR) of 30 per cent from FY05 to FY11 on account of growing awareness about life insurance, favourable demographics, buoyant equity markets, rapid distribution expansion and launch of innovative products, the report noted. It added the life insurance sector would grow at the rate of six per cent till 2018.

Non-life insurance sector’s volume growth has been more consistent compared to life insurance sector’s growth, according to the report. The gross direct premium of non-life insurance has grown at a CAGR of 16 per cent since FY02.

However, it added that steady volume growth did not materialise into comparable value creation, particularly since 2007, when price deregulation came into effect. Before 2007, insurers could drive profitable growth by altering distributor payouts.

Despite the recent slowdown, the CII-EY report has pegged the growth of non-life sector a CAGR of 14 per cent till 2018.

“Favourable policy action, albeit delayed, has set in motion a new phase for the sector, which is expected to drive the next era of growth,” the report said.

To realise its full potential, the sector must focus on the aspects that will build value for all vital stakeholders. It said value for customers, the prime stakeholder, can be enhanced by providing more options at the time of purchase by developing segments such as pensions and long-term care, which are currently being offered in a very limited way.

It added that it would be critical to accurately assess customers’ needs and ensure transparency in communications to embed a feeling of trust among customers.