The country’s chief insurance regulator on Monday rapped various aspects of the sector’s functioning, saying companies needed to review many things.
He said technology use was lagging, distribution channels needed a relook and agents didn’t seem to be paid or motivated enough. Customer satisfaction wasn’t getting enough attention. Persistency on products was unsatisfactory and pensioners were often being taken for granted, declared J Hari Narayan, chairman of the Insurance Regulatory and Development Authority (Irda).
His officials and he, said the regulatory chief, would be meeting the Union finance minister on Wednesday to discuss various issues, including those on income tax and service tax. Some insurance companies had met the finance minister in the first week of this month on various issues such as product design and approval, taxation, investment and micro insurance.
Narayan was speaking at the Global Insurance Summit of the Associated Chambers of Commerce and Industry.
He said insurance companies needed to leverage technology the way their banking counterparts had done.
Agents
As for agents’ attrition, “each year, about 700,000 agents pass out from institutes. However, more than 700,000 agents also drop out every year,” he commented.
The commissions agents earn aren’t high enough, he added. Insurance companies spent well on management but agent expenses, a subset of management costs, had not seen a rise. “There is still room for commission to increase,” he said.
Customers
Hari Narayan also rapped insurance companies on customer satisfaction. “Several players in the industry have worked in more than one regime. My question to them is, though they follow all the stringent minimum guarantee and other stringent rules of insurance in other nations, why is it that they act surprised while doing business in India? Is it that they are here to make a quick buck?,” he questioned.
He said none of the projections by these companies were right and they were seen surviving largely on surrender profits. “We must revisit our models to make sure that it conveys some value to the customer,” Narayan said.
Bancassurance
Narayan said India had adopted a 1:1 system in bancassurance, meaning a bank could cater to the needs of only one insurance company. The Indian Banks’ Association had been asking for a system where a tie-up with more than one insurance player was possible but this could not be facilitated, as the regulations did not permit this.
Instead, the Irda chairman proposed the 1:1 model be applicable to a group of states. “We can shape it such that a bank is able to tie-up with an insurance company for a certain group of states and another insurance company for some other states,” he said.
Rural needs
The chairman said rural and social obligations need to be fulfilled by insurance companies. He added the regulator had proposed to the Life Insurance Council a structure of having a lead insurer for selling rural products in certain regions.
“We are examining a way to have a lead insurer for each state/geography, so that it would bring greater stability in insurance for these regions,” he said.
Products
The regulatory chief said insurance regulations on products and their clearances were much milder in India than in developed nations. “Products are not a brand of biscuits,” he said, adding the market was not starved for products.
He further said our persistency levels were one of the lowest in the world and adding new products would not be very helpful.
On pension products, Narayan said the current ones before the regulator for approval were mutual fund products and not pension products. “Just because an insurer names a product as pension, it does not mean that it serves the purpose of a pension product. A pension product, invariably, should lead to some kind of an annuity and unless these are structured accordingly, they will not be approved,” he warned.
