The insurance industry in India is all set to enter the second phase of its growth trajectory post liberalization of the sector in 2000. The Insurance 2.0 phase, is largely driven by government initiatives like crop and health insurance; the recently launched Ayushman Bharat Yojana – National Health Protection Mission is likely to buttress this growth to new height in coming years. It may be noted here that the Insurance Regulatory and Development Authority of India (IRDAI) in recent past made it mandatory for insurance companies to adhere to the Order of Preference for Reinsurance contracts.
Keeping in mind that Reinsurance and Health Insurance are likely to drive the insurance business in India, the Birla Institute of Management Technology (BIMTECH) in association with Swiss Re organized the BIMTECH Insurance Colloquium 2018 at the Mumbai Cricket Association (MCA) Recreation Centre in Mumbai on October 5, 2018.
In his Welcome Address, Dr. Anupam Varma, Deputy Director& Dean – Academics, BIMTECH mentioned that in the financial services domain, the insurance industry occupies a special place because of its emotional connect with millions of people of our country. Over the years, insurance has been playing an increasingly significant role in closing the protection gap and also lending stability to the financial world.
In his Inaugural address, Mr. G. N. Bajpai, former Chairman LIC and SEBI, articulated the transition of Indian economy. “The economy has evolved from normative to agricultural, to industrial and the present information economy. The world is rapidly moving from one form of economic order to another. The future will witness Biotech and Info-Biotech economy, followed by the cosmic-economy. The twin revolution of information and Biotech today could restructure not only the societies and economies but also the bodies and minds. With each progression, insurance risks involved, would also change.” Mr. Bajpai also stressed that the increasing interest rates and fuel prices were likely to transform the macro-economic order.
Going from Macro to Micro-Economics, Mr. Sakate Khaitan, Senior Partner – Khaitan Legal Associate, said, “The Order of Preference is the most debated and prickly issue in Reinsurance right now in India. Mr. Khaitan further argued that three points i.e. taxation, regulatory ease and incentivisation in the short-term would impact the creation and facilitation of Reinsurance Hub in India. The current tax regime is hardly benign as tax rate payable by reinsurers is over 40% and along with the cost of stamp duty and GST – all three combined make taxation a bane to the industry. The issue of incentivisation may be controversial but is certainly a game changer and is justified given the high taxation environment and regulatory uncertainty. It is necessary to incentivize Reinsurers to establish their bases. He lauded the other government schemes – the Ayushman Bharat Yojana and the Pradhan Mantri Fasal Bima Yojana.
Prof. Pratik Priyadarshi, of BIMTECH, while moderating the panel discussion on “Reinsurance Sector: Changing Paradigms vis-a-vis Order of Preference” raised several pertinent questions. The panelists debated at length the pros and cons of the above initiative of the government.
Mr. Ritesh Kumar, CEO & MD, HDFC Ergo General Insurance said that the Order of Preference was needed for orderly conduct of business. In response to a question that how would the industry respond if the barriers were removed, Mr. Ritesh Kumar retorted by pointing out “that it was very simplistic to mention that take off the barriers, but in that case for example, who would take up the credit risk”.
Mr. Sanjay Datta, Chief Underwriting, Reinsurance & Claims, ICICI Lombard, said that the time had come for India to emerge as a strong regional hub of reinsurance. We need to develop local capacity and not export risks.
Mr. Pankaj Tomar, Chief Underwriting Officer, Axa Re, strongly maintained that one should not look at the Order of Preference in isolation. We need to train our attention to aspects like solvency regulation, minimum retention, retrocession, corporate governance as well. We need to view all regulations together rather than only the order of preference.
The Insurance Brokers Association of India (IBAI) vehemently opposes the Order of Preference and rightly so, maintained Mr. K. L. Naik – the well-known Reinsurance Broker. This is because, globally, 90 percent of reinsurance premium is transacted through brokers. The Order of Preference in its current format in India, does not allow the freedom of choice between Indian and international reinsurers to bear catastrophic losses.
Another prominent speaker, Mr. C. B. Murali maintained that the order of preference was a challenge and also posed hurdle. India is faced with complex problems. Cyber risk is emerging as top three big risks in the world. “It is getting intertwined with contingent business interruption and supply chain risk. If India as a market has to address complexity – it needs a very robust, diversified risk and reinsurance support.
Prof. (Dr.) Abhijit K Chattoraj moderated the panel discussion on “Health Insurance: Government initiatives, Challenges and Implications”. In his opening remark, he mentioned “promoting and protecting health was essential to human welfare and sustained economic and social development. This was recognized more than 30 years ago by the Alma-Ata Declaration signatories, who noted that ‘Health for All’ would contribute both to a better quality of life and also to global peace and security”. He maintained a good health system should address the primary care and preventive care but unfortunately both were in shambles in India. Health care delivery in India suffers from Inverse Care and Impoverishing Care.
Dr. Denny John, Evidence Synthesis Specialist, Campbell Collaboration revealed that sizeable population in India face hardship financing – i.e. they sale assets and borrow to pay for their catastrophic healthcare expenditure. This is because we are neglecting primary care in India.
Mr. Ankur Kharbanda, CEO, West Zone, Apollo Munich Health Insurance, maintained that it was very difficult to tap the rural population and even the established MNCs have failed to penetrate the rural market while responding a question on failing to penetrate the rural market.
It is a gradual process and many insurance companies have started going to two and three tier towns. He also maintained that most states would turn to insurance model in the long run while fulfilling the dreams of Ayushman Bharat.
Mr. G. L. N. Sarma, CEO, Hannover Ruck SE – India, said that there were tools and data available to decently price a product but nobody can price the element of fraud, all that one could do is to take help of predictive analytics to identify propensity of fraud in a particular segment. One can mitigate fraud but it cannot be eliminated.
Mr. R. S. Naik, Senior Vice President, Star Health Insurance, agreed with the moderator that there was no standardization in Pre-Authorization process mainly because of the behaviors of the health care providers. Standard treatment guidelines and treatment protocols can better address this problem.
Mr. Sagar Sanyal, Director, Technical Services, Zoom Insurance Brokers lamented the near absence of health insurance coverage in rural India. The health insurance is limited to big cities and metros only.
India needs an institute like the UK’s National Institute of Clinical Excellence (NICE) to regulate clinical practices and protocols in India. Mr. Denny John agreed with Dr. Chattoraj that India should learn from the best practices available in India first and then should go for best global practices.
Mr. M.G. Diwan, Former Chairman, Life Insurance Corporation of India, was honoured with the BIMTECH Lifetime Achievement Award for his outstanding contributions to Insurance Industry. In his acceptance speech, he expressed his displeasure at the low penetration of insurance business in India.