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When T S Vijayan took over as the new chairman of the Insurance Regulatory and Development Authority (IRDA), he was the third individual to hold the post, but the first from within the sector. With Vijayan completing 100 days in office, insurance sector officials are hopeful of a turnaround in the sector by the end of this financial year.
“While the earlier Irda chairman did intake an effort to boost insurance growth, we are of the view that an industry person like Vijayan will be able to bring back growth to life insurance companies,” said the chief actuary of a private life insurer.
In the last financial year, the life insurance industry saw a dip in the new business premium of 6.3 per cent. Even India's largest insurer, LIC, too saw a drop of 6.4 per cent in the new premium collection in FY13. General insurers, on the other hand, posted an 18.8 per cent rise in premium collections for 2012-13. After Vijayan took charge, industry experts point that some green shoots have been noticed. In April 2013, the life insurance industry segment saw a marginal rise in new business premiums of 0.57 per cent over the same period last year. Private life insurers saw a 18.5 per cent rise in the overall new premium collection in April. Non-life premium collection saw a 22 per cent rise in premium collection for April , compared to the same period previous financial year.
In regulatory changes, while the product guidelines for life insurance and health insurance products were issued by former chairman J Hari Narayan, several changes have been made in the traditional product structure by Vijayan.
Further, deadlines for withdrawal of existing products have been pushed to October for health and individual life insurance products and August for group life products.
Insurance companies have been complaining the process of approval of products by the regulator has been slow. To offer a solution, Vijayan asked the chief executives of life insurance companies for a product planner in advance for each year, so that approvals could be quicker and more planned. While a certain section was not in favour of this reform, others say this could expedite the approval process.
“The regulator has restricted filing of more than five insurance products from next year. While it might be a constraint on newer companies wanting to launch several products in a year, it will make product approvals quicker for the industry,” said the chief marketing officer of a private life insurance firm.
The regulations that were being demanded by the intermediaries of insurance companies have also been given a push by the new regulations. “Irda's decision to set up a committee to address our issues including renewal of licenses and allowing banks becoming brokers, will in the long run, lead to more players being added in the broking community,” said a senior official of an insurance broking firm.
Not just life insurance, the general insurance sector too was catered to, by the hike in third party motor insurance premiums. In his first piece in March as the publisher of the Irda journal, Vijayan had emphasised on reducing losses in the segment and devise strategies to ensure that regular renewals of policies take place.
However, critics point that there is a tough road ahead for the insurance sector. Insurance penetration, which surged consistently till 2009, slipped in the consecutive second year and stood at 4.1 in 2011, compared to 5.1 per cent in 2010. Similarly, India has reported a fall in the insurance density for the first time in the year 2011. The figure fell to $49 (Rs 2,695 approximately) in 2011, from $55.7 (Rs 3,063 approximately) in 2010.
Banks becoming insurance brokers is also an area where newer players in the industry are hoping for an open architecture for bancassurance. While Irda is comfortable with banks becoming brokers and selling products of multiple insurers, RBI has raised some concerns on this.
“Bancassurance and product reform implementation will be the biggest challenges before the Irda chairman in the next two to three quarters. The industry is pinning all its hopes on the regulator, since business growth is dependent on these factors,” said the chief financial officer of a general insurance company.
