Hari Narayan, IRDA Chairman spoke about various initiatives taken by the regulator to strengthen the distribution channel at the 14th CII Insurance Summit
Distribution
Agency model in India is taking a new shape. Earlier, individuals took up insurance agency business as a part- time activity to generate extra revenue. Once they saw the agency model giving them adequate income, it became their only source of income. But now things have changed again and for very few individuals this is the only earning source. IRDA Chairman wants to take initiatives to strengthen this category of agents.
“What is it that we can do to strengthen this category? Insurance companies do have a model where the senior agents will mentor junior ones. It is still not very clear in the regulatory architecture and I don’t think it will make significant difference to the industry. However, it will help us create more penetration,” said Hari Narayan, IRDA Chairman.
The regulator is also trying to make the task simpler for new agents to enter the industry. It feels that the entry hurdles are keeping talented people away from the industry. Hence, it is trying to build up a simpler form of entry model for the small agents to enter the industry.
Product development and innovations
IRDA is trying to compress the time frame between the design of the product and regulatory approvals. It is trying to develop a system of do’s and don’ts on given type of products to make the regulatory approvals smoother.
Utilizing banking channel for distribution
It is trying to make the insurance policies available in demat form. To enable that it is trying to redesign the proposal form - the paper which defines insurance law. It is trying to make the banking channel of distribution stronger by bringing in such innovation. For the banking channel to grow it needs to build up trust among its customers and also utilize high end technology.
Investment architecture
It is going to re-look at the investment architecture. The IRDA Chairman explained this matter citing the example of other countries. He said, “If we look at the portfolio of American insurance companies, bulk of the investment is in various kinds of bonds and not so much in equities. And if we look across countries, a large chunk of the investment is in government gilts and the rest in fixed return instruments. In India too, we have the same model. But a few changes in architecture are needed to enable the insurance companies to manage their portfolios. When we calculate, we notice that the least performing company gives a return of 7% while the best performing gives 27%. I think that gap will widen as we go on.”
The regulator is trying to make the industry more customer friendly and also trying to increase the penetration level.