The insurance industry can make rapid strides in India if insurers sell only simple products and avoid mis-selling, Finance Minister, P. Chidambaram said after unveiling a new brand â€” â€˜PNB MetLifeâ€™ â€” in the Capital.
The reason why insurance has stumbled despite opening of the sector in 2001 was because of mis-selling, Chidambaram added.
â€œIf you want to sell insurance in India, you must sell simple products and make it absolutely clear to your agents that they should not mis-sell the productsâ€, he said.
Chidambaram pointed out that demand for insurance products and growth of the industry had been tepid despite robust demand for banking services. â€œWe should ask ourselves why in our country, where there is demand for banking services, there is no demand for insuranceâ€
With Punjab National Bank (PNB) having completed its 30 per cent stake buy in MetLife India Insurance Company, the life insurer was recently rechristened as â€œPNB MetLife India Insurance Company Ltd (PNB MetLife).
PNB had acquired the 30 per cent stake in MetLife for a paltry consideration.
But the coming together of two big players (PNB and MetLife) is expected to be win-win for both.
MetLife Inc has now upped its stake in PNB MetLife to 26 per cent after buying certain number of shares from other shareholders. J&K Bank continues to be an investor in PNB MetLife and holds 5 per cent stake, it is learnt.
While MetLife can use the vast distribution reach of PNB (over 5,900 branches) and its customer base of 7.8 crore, PNB has now forayed into insurance and can sell the products through joint branding arrangement (PNB-MetLife).
Both on the measures of sum assured as a percentage of gross domestic product (GDP) and insurance penetration (premium as a percentage of GDP), India was trailing the developed world by a huge margin, Chidambaram said.
Insurance penetration is estimated at 4 per cent of GDP and in the recent years, this had fallen a bit.
â€œInsurance is a challenging business. It is a big challenge in India, which is, perhaps, the most challenging market in Asia.
â€œIf you succeed in India, you will even succeed in Eskimo land,â€ he quipped.
Chidambaram expressed hope that the coming together of two giants â€” one in banking sector (PNB) and the one in insurance (MetLife) will address the challenges of insurance in India.
K. R. Kamath, Chairman and Managing Director, PNB, said that PNB MetLife would adhere to the advice of the Finance Minister and focus on selling simple products in the Indian market. He said PNB MetLife aspires to be amongst the top three life insurance companies.