Tajinder Mukherjee, Chairperson and Managing Director, National Insurance Company Ltd., spoke to BE’s Shinjini Mukherjee regarding the poor insurance penetration rate in India and a way out of this.
Q. Why are penetration and density of insurance so low in India in spite of its decent level of economic growth for decades?
A. Admittedly, these indicators have been comparatively low in India historically. But I trust that this will serve as an opportunity for us instead of being a hurdle. It has been predicted that the insurance industry is going to reach $280 billion by 2020 driven by increasing awareness, novel products and innovative distribution channels. Health insurance is going to play a major role in this expected growth - especially with the government supported plans like Ayushman Bharat. It is the same for crop insurance. More and more players are coming into the sector. Ever increasing income levels of the middle class in the country, increasing life expectancy and many more parameters are going to drive the insurance industry to higher echelons.
Q. How do you plan to reach out to more sections and enhance awareness of your products?
A. Recent years have seen a flurry of promotional activities by the insurance companies in India, which have surely contributed to the higher level of awareness of insurance products among the public. Now more people are approaching the companies for their property and health insurance needs voluntarily. This is a highly positive sign. Especially when we look back, people restricted their insurance needs only to the statutory requirements. Our company, being the oldest non-life player in India, has the advantage of having enormous trust from our clients. We have recently launched very innovative publicity campaigns and we would like to enhance them in future. Simplifying the policy wordings, packaging many covers to suit the specific requirements of customers, streamlining and expediting the claim procedure are all on the anvil.
Q. Insurance penetration in India had been 1% in 2000-01. It increased to 4.6% in 2009. But then there has been a downward trend. It was 3.69% in 2018. What was the reason for this?
A. The general insurance penetration is typically measured as the ratio of the total non-life insurance premium to the GDP in US dollars. That relates to the amount of premium that is being generated in the country as a percentage of GDP. So when government comes in with very simple and economical products, it does not really bring up the amount in terms of US dollars. If you are getting a two lakh
insurance for `12 under the Pradhan Mantri Suraksha Bima Policy, it does not add to big numbers. The same is the case with the large number of beneficiaries under the crop insurance and the newly launched health insurance schemes. This does not mean that penetration does not increase. So, many more people are covered, which is very important in a country like ours. If you just look at the number for
people covered, it is definitely improving but not in terms of US dollars in which it is typically measured. But at the
same time, there is no denying that there is need for creating more awareness for insurance as a protection against misfortunes and accidents.
Q. The Indian government is thinking of a merger of PSU insurance companies. How helpful will it be?
A. There was an announcement in last year’s budget for a proposed merger but things are still being worked out.
The details have not been clearly spelt out. So let’s
wait and see. But I think the idea is to reduce competition between the public sector undertakings and to
create one or two big companies in India. There are twenty-five five other companies also in the fray so it will
Q. It is said that procuring a policy and securing aclaim are time taking and difficult. How can these hurdles be removed?
A. This trust deficit is not confined to India alone. The same thing prevails even in developed markets. But over the last decade, things have improved a lot in India. Now we have different channels. Every company is now offering the customers facilities including online distribution and over the counter type of sales.
National insurance has its customer portal where userscan go online, fill a simple proposal form and procure a policy. Our strong agent force has been equippedwith the facility to take a policy from anywhere using mobiles and laptops.
Q. The Union Budget of 2019 has announced a 100% FDI allowance in insurance intermediaries. Why is FDI becoming so necessary in India?
A. We do have top international intermediaries alreadydoing business with Indian partners. This is a welcome move by the government and will allow more expertise to come in. There are new openings like e-commerce which could spur the growth of intermediaries and bring in more professionalism in the industry as a whole.
Q. Please mention some of the proposed re-insurance policies of IRDAI. How far is a new re-insurancepolicy needed?
A. The IRDAI has laid our re-insurance regulationswhich became effective more than a year ago. The regulations have tried to maximise the retentions within thecountry by laying an order of preference for placing re-insurance business. With many of the leading re-insurers setting shop in India, the idea is to develop the country as a re-insurance hub.
Q. Please point out some of the matters that should be implemented to have a better insurance sector in the country.
A. Talking from a PSU point of view, I would suggest that we need a fair playing field. I would have personally preferred lesser GST on insurance, which would induce more people to buy insurance. The existing GST of 18% is very high for health and other personal lines of insurance.