Firms optimistic about a future ‘insured’ by regulatory changes

Year 2012 wasn’t the best for Indian insurers, bogged by several regulatory changes and slowing in premium growth. However, company executives hope the situation would see some improvement in the next year, especially with some stability expected on new product guidelines and bancassurance.

Jayant Dua, managing director & CEO of Birla Sun Life Insurance, said, “ The Indian insurance industry may have witnessed a number of ups and downs in the recent past. The question is how best this potential can be converted to reality. There would be a drive to improve profitability through product mix, strengthening distribution capabilities, and providing value-added products and services to a diverse client base.”

Finalisation of the much-awaited product guidelines for life insurers is also expected to drastically change the sector’s outlook. While the guidelines were expected to be brought out by the end of calendar year 2012, these are now expected only in the fourth quarter of FY13. This would be of particular significance to companies, as the guidelines would call for several existing products to be re-filed.


  • In the commercial third party segment, third party motor pool was replaced by declined risk pool
  • After a meeting with insurers, the Finance Minister proposed a slew of reforms. Among those were strategies to increase penetration and taxation reforms
  • An open architecture of bancassurance is proposed, enabling banks to act as brokers and tie-up with multiple insurers to sell their products. Final guidelines are awaited
  • Draft product guidelines for life insurers were proposed. This included reduction in surrender charges and better commissions for agents. Final guidelines are awaited
  • New draft proposals have been brought out in health insurance and micro-insurance. While the former proposes no exit age for health insurance and cover for non-allopathic treatment, micro-insurance norms calls for more products for rural areas

Alok Roongta, chief financial officer, Bharti AXA Life Insurance, explained they expect a number of regulations, draft and new initiatives, to be finalised in 2013. He added that at an overall economic level, an improvement would be seen, as the government looks keen to hasten reforms.

Premium numbers of life insurers have also seen a fall this year. For April-October, life insurers saw a drop of 3.4 per cent in new business premiums, compared to the same period in the previous year. Insurers, however, are not too optimistic about the numbers going up next year.

Amitabh Chaudhry, managing director and CEO of HDFC Life, said the sector will continue to be tough in the next year. “We should not expect the tough innings to go away. Though there will be a growth of the big players, de-growth will be seen in some of the smaller ones in life insurance,” said Chaudhry.

Companies said that some revival of the industry could be seen in 2013 but only in the second and third quarter of the next fiscal. Malay Ghosh, president and executive director of Reliance Life Insurance, hopes to see several enabling regulations, as mentioned by finance minister P Chidambaram, in the next few months, driving stable growth for the sector.

“The key would be open architecture for bancassurance, use and file product approval process, simplifying the agency licensing process among others,” said Ghosh.

General insurers have had a comparatively better year, with the loss-making third party motor pool dismantled and replaced with declined risk pool. For April-October, general insurance companies saw growth of 19.4 per cent over the previous year.

According to Milind Kharat, chairman and managing director of United India Insurance, the outlook for next year would be positive. “This is not just because of the regulatory changes expected, but also due to the fact that the economy is picking up,” he said.

In spite of the regulatory changes, the motor portfolio of companies continues to bleed. In the coming year, companies expect rates to firm up, so that they could make underwriting profits.

K K Mishra, CEO of Tata AIG General Insurance, said, “If we don’t have major catastrophic loss, rates will be more or less stable, with an increase of about five to 10 per cent.”

Adding to this, Bhargav Dasgupta, managing director and CEO of ICICI Lombard, said the next year will be positive for insurers, both in terms of growth and profitability. “This year has been a relatively difficult one for the Indian economy. We are reasonably optimistic that general insurance industry would grow by 20-25 per cent in the next five years. Improvement is also being seen on the pricing front,” he said.

Players in the sector expect 2013 to be a year of consolidation. According to experts, while new entities would enter the industry, the sectior could also see some exits and mergers and acquisition of those with bleeding portfolios.

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