The year 2014 was marked by structural changes for traditional insurance products, guidelines for which were implemented from January. Besides this, the stock market growth also bought the unit-linked insurance products (Ulips) back into focus. While this led to premium growth for some life insurers, overall industry growth remained muted, with players like Life Insurance Corporation of India (LIC) seeing a premium drop in April-September period.
Similarly, on the non-life insurance side there was a slower rate of premium growth due to the slowdown in the auto industry. With a large portion of premiums coming from the motor segment, drop in sales led to a lower growth rate in motor insurance premium and hence overall premiums.
Gopal Balachandran, CFO, ICICI Lombard General Insurance, said as the headwinds to growth subside with efforts from policy-makers and an overall improvement in the macroeconomic scenario, the industry is expected to pick up pace.
The general insurance industry mirrors the prospects of corporate investment and retail growth. Any incremental momentum on these fronts will positively impact the industry growth, he added.
On the general insurance, industry players said newer avenues have opened up in areas of liability and directors and officers liability space with changes in the companies Act.
Further, both standalone health insurance companies and non-life companies are awaiting details of the Universal Health Care Plan, proposed by the Narendra Modi government.
Unviable pricing and heavy discounts to corporates were a matter of concern, especially in the group health and property space. However, Insurance Regulatory and Development Authority (Irda) came out with detailed guidelines on pricing of risk and cautioning insurers against offering unviable and cheap rates below the burning cost.
Tapan Singhel, MD & CEO, Bajaj Allianz General Insurance, said they were hopeful and expect a resurrection of the industry given the measures taken by the regulator to correct pricing within the industry. He said this was coupled by the initiatives by the new government at the centre like smart cities, digitalisation, Make in India and financial inclusion among others.
With a better economic condition, insurers said higher rate of double digit growth can return to the industry. Non-life sector, which was growing at almost 18 per cent in FY14, slowed down to around 12 per cent in FY15 (till October 2014).
K K Mishra, MD and CEO, TataAIG General Insurance, said the industry is expected to maintain momentum and achieve better double digit growth, say 15 per cent or more, in FY16 too. This growth, he said will depend on economic and industrial growth within and beyond India.
“Health insurance and focused penetration into existing distribution remain our key growth drivers. We are eyeing healthy growth over our current base. We will keep the momentum on in motor, and will grow the sustainable segments within the overall portfolio,” said Mishra.
On the life insurance side, though the initial months of the year went into refilling of the existing products and completing the product bouquet, competition in online term pricing was also seen.
Tarun Chugh, MD and CEO, PNB MetLife, explained the new portfolio of products would offer lower commissions, higher surrender value, uniform life protection and provide more transparency.
“If the Insurance Amendment Bill comes through, the industry will be reenergised in 2015 with the infusion of capital and we can look forward to a 5-10 per cent growth rate. The investments will be done in product innovations and to increase market penetration which is currently pegged at 4 per cent of GDP (gross domestic product),” he added.
The industry is also looking forward to the digitisation initiatives of the regulator with respect to Common Service Centres (CSCs) and insurance repositories. New models of distributions, including banks as brokers and Insurance Marketing Firms are also being looked forward to.
Distribution models will be relooked, with digitisation and banks-as-brokers guidelines coming in. We will also see more investment in technology to drive customer centricity.
Deepak Mittal, MD and CEO of Edelweiss Tokio Life Insurance, said the investor sentiment will also improve further with the passage of the Bill through the ordinance route. He also added that customer on-boarding and post sales services will also see improvement in the near future.
Estimates suggest a 49 per cent foreign direct investment (FDI) cap will bring long-term capital and newer players into the industry from next year.
Chugh said at present the total capital deployed in the life insurance sector is about Rs 35,000 crore. The FDI in this (assuming 26 per cent) is close to Rs 8,700 crore. He said if the cap is raised, the sector stands to gain additional Rs 7,800 crore as FDI.
“The industry at this stage does need long-term capital for growth and expansion, which only FDI can bring in. FDI not only brings in capital and foreign exchange immediately into the economy but enables companies to invest further in managerial ability, technical knowledge, administrative organisation, and innovations in products and processes,” said Chugh.
Vibha Padalkar, ED & CFO, HDFC Life, said the overarching theme of the Bill is to empower the regulator.
Defaults by insurers will also attract heavy penalty. Padalkar said the Bill also proposes to increase the overall quantum of penalty on insurers from the current Rs 5 lakh per incident of violation to Rs1 lakh per day per incident, going up to a maximum of Rs 1 crore per incident, whichever is less in an attempt to increase insurers seriousness to any default.
She added the Amendment Act has also approved Securities Appellate Tribunal as the appellate authority for the insurance sector, which should bring in more transparency and discipline in the sector.
Demand for Ulips is also expected to take a further uptick. Since the stock market has been showing positive signs of growth, there is interest towards buying equity-linked products.
Rishi Piparaiya, director, marketing and direct sales, Aviva Life Insurance, said though it is probably a bit early to say but with the trajectory of the markets and introduction of some extremely competitive plans, we should see an uptick in the demand for Ulips in 2015.
Anuj Agarwal, MD and CEO, Bajaj Allianz Life Insurance, said till November, 55 per cent of our individual business came through Ulips. “Going forward, we expect to have an ideal mix of 50 per cent traditional products and 50 per cent Ulips.”
Alok Bansal, co-founder & CFO, Policybazaar.com, said though they do see double-digit growth for insurance sector in FY16, this will not be across the board.
The passage of the Bill will be the key, he said. “While we welcome the decision of Modi-led government to pass the insurance Bill through Ordinance, we feel that it won’t really boost investments for the existing players. The existing insurers might get into serious discussions with foreign investors, but unless government gives a clear idea on the passage of the Bill, it will continue to hold back both the parties to go ahead with the deal,” he said.