Govt too has a role in increasing insurance penetration: Nilesh Sathe

The onus to deepen insurance penetration in India does not solely rest with insurers and insurance regulator; rather, it is the responsibility of every stakeholder including the government, said Nilesh Sathe, Member (Life) of the Insurance Regulatory and Development Authority of India (Irdai) and chief guest at the annual Business Standard Insurance Round Table on March 6.

“India’s insurance industry has a huge business opportunity waiting to be harnessed. In comparison to the world’s total insurance premium, India accounts for just 1.5 per cent. When the penetration is low, there is a greater scope to expand,” said Sathe.

High goods and services tax (GST) on premiums is also detrimental in improving penetration. “With low social security provisions happening or possible in India, charging 18 per cent GST on premiums is brutal,” Sathe said in his keynote address at the Round Table.

The government must also allow separate tax breaks for pension products of insurance companies, in line with the Rs 50,000 separate head created for the new pension scheme, he further said.

In this regard, he also welcomed the entry of e-commerce firms in the insurance space. “Let the Amazons and Flipkarts come into insurance. I am sure there will be more and more people who will appreciate and buy insurance,” he said.  

Increased life expectancy means that awareness is rising about high out-of-pocket expenses in health care, and this is increasing the need for insurance. Premium collection for health policies has been growing at 25 per cent year on year in the past five years. 

As awareness about insurance is rising, products like pension, health, motor and property can be growth engines for the sector.

The insurance sector needs to further focus on making their products simple, adopt low-cost distribution through digitisation, and manage fraud better, he said.

“The insurance sector plays an important role in driving the economic development of the country with its long-term provisions for funds for infrastructure development, which concurrently strengthens the risk-taking ability of the nation,” Sathe said.

Demonetisation, unified payments interface, IndiaStack, and new schemes by the government have come as a great tailwind for insurance. However, a new generation of customers, especially millennials, are buying insurance and are conversant about technology, which should be harnessed, he said.

He said, “Let us not get carried away by whether insurance is good or mutual fund is good. Everything is good. Non-financial savings is not good. “Anything that brings a customer into a financial savings must be promoted,” said Sathe.