In his address to the IRDA board of directors, the Finance Minister had plenty of advice for the regulator and industry to grow the business.
The FM advises IRDA to adopt a new model of distribution that can be beneficial for lower income segment in the semi-urban and rural areas. While addressing the IRDA board of directors yesterday, Pranab Mukherjee underlined the need for a second level of agents with lower entry restrictions. He expressed his concerns over making insurance available in semi-urban area.
“This is a good news as there are a number of agent who want to be associated in semi-urban areas, can get an entry into the industry easily. IRDA’s new syllabus and guidelines has deterred many new agents from being the part of the industry. If this new idea is implemented, it will also open a lot of job opportunities in these areas,” said Ashok Mukherjee, IFA from Gwalior.
The life insurance companies too welcomed this suggestion. “The second level agency model will also help private insurers to increase their penetration,” said a top official from Reliance Life Insurance.
The FM also advised IRDA to promote long term savings and protection plans. He noted that that the insurance industry had shown balance between growth and profitability. He advised the industry to enhance market profitability by taking a holistic approach with a new business model and not by adopting an aggressive price based competition.
Unhealthy competition among insurance companies in India is a matter of concern, claimed Pranab Mukhejee. He added, “To ensure prudent underwriting and curbing unhealthy and suicidal competition among the companies through undercutting premiums is something that the regulator will need to address suitably.”
He felt that the focus area for insurance companies should be on a proper business and distribution mix along with excellence in operation and handling claims. It was important that the companies should:
- Adopt a granular growth approach and realign resources differentially by channel, product and geography
- Strengthen core distribution capabilities
- Deeper retention through ‘customers lifecycle management’
- Invest in technical excellence and
- Drive comprehensive expenses management.
To make insurance
popular among the youth, he advised IRDA to popularise digital channel of
distribution and incentivize E-Governance and E-Policy. FM also raised concerns
for policy holder protection by curbing mis-selling. He said, “IRDA should be
expressively punitive to companies who resort to mis-selling or violate the
initially agreed terms and conditions.”