IRDA to flood India’s reinsurance market with 6 new players
17 Sep 2016
Global reinsurers are likely to swamp the Indian insurance market by the start of next year with the Insurance Regulatory and Development Authority of India (IRDA) giving final clearance to as many as six global players.
A clutch of global reinsurers, including Munich Re, Swiss Re, Scor, Hannover Re, XL Catlin and RGA, are awaiting IRDA clearance to churn the market in India and IRDA expects to approve their applications for licence by next month, enabling them to start operations by January 2017.
''About five-six companies have come and I think by January 2017, there should be some players in this market. We will be taking a decision in the next board meeting in October. Then they will have to bring capital and start working,'' IRDA chairman TS Vijayan said at an ASSOCHAM event.
Foreign reinsurers need three levels of licences to start operations in India and with 1 licence already in hand, some of them are waiting for R2 and R3 licences.
Public sector GIC Re is the only domestic reinsurer in the country at present.
Vijayan also said that IRDA would finalise the regulations pertaining to payment of commission or remuneration to insurance agents and intermediaries in October.
"We discuss with everyone, we bring the draft, people give their feedback on it and we again discuss that thing. Then it is taken to Insurance Advisory Committee, looking at suggestions, they suggest it and then it goes to the authority," he added.
"In the previous Act itself there was a provision for listing, this was changed, we wanted to have a discussion on this subject, so we brought out a paper and companies have expressed that thing, so let us see how it goes forward," Vijayan added.
He said also that IRDA has not fixed any time-frame for the final regulations. "I believe that discussions are going on how to list general insurance companies, all five to six of them."
He added that considering about five months are still left in this financial year, listing of more PSU insurance companies was possible. "It is possible but I am not too sure, we have not got any official paper, it is in the discussion stage but nobody has approached us."
On the issue of insurance marketing firms, he said "We have allowed to them sell up to three companies' product, these are evolving processes."
He said that though insurance industry in India has grown more than ten-fold in terms of premium collections from Rs45,000 crore in 2000 to Rs4,63,000 crore in 2015-16, insurance penetration in India (or the percentage of insured population) is still low compared to the world and Asian averages.
"We need to focus on number of lives or risks covered, spread across geographies, gender and level of insurance coverage, as clearly indicated by around 0.7 percent only insurance penetration observed for Indian general insurance industry against world average of 2.77 per cent," said Vijayan.
"Imparting financial literacy, incentivising Indian households to transfer savings from physical assets to financial assets and effective distribution among rural areas are expected to bring more and more individuals within insurance ambit," he said.
Vijayan, however, said insurance companies will have to find new models and approaches to ensure increased coverage and reach of insurance across diverse social, cultural, geographical features of rural India.
He said that innovative products needed to be distributed in a manner that encourages people to buy insurance cover by realising benefits, requirement and necessity. "An environment must be created to facilitate the same by expanding distribution reach and improving accessibility options to consumers by optimal usage of technology."
In his address at the ASSOCHAM conference, SK Roy, chairman, Life Insurance Corporation (LIC) said, "For the life insurance industry these are the best times, as the current financial year has seen fantastic growth, August 2016 has seen stupendous growth as LIC's new business premium grew by more than 92 percent for August."
"We have yearned for long for this type of growth but seen very rarely, so definitely this is the very good time to be in the life insurance industry," said Roy.
"Going forward, industry will be working on a more stable platform of regulations than it was in last 12-18 months, that is also a very positive feature," added the LIC chief.