Hyderabad : India’s insurance industry needs a huge capital infusion of over Rs.50,000 crore ($8 billion) and foreign direct investment (FDI) can make things easy, its regulator said Friday.
“There are various estimates of Rs.50,000 crore upwards,” said Insurance Regulatory Development Authority (IRDA) chairman T.S. Vijayan. The regulator said it welcomes any type of capital infusion.
“If foreign capital is increased, it will be easier flow of capital than all put together by Indians. We are not saying FDI has to come. Capital is required and Indians may not have that much ability to put all the capital,” he told reporters on the sidelines of an event here.
He said since the bill for 49 percent FDI in insurance sector is in parliament, there will be some action only after it is passed.
The Insurance Laws (Amendments) Bill, 2008, which seeks to raise the FDI limit in the sector to 49 percent from the present 26 percent, was referred to a select committee of parliament last month.
Vijayan said various suggestions would be submitted to the select committee to modernise the bill.
Pointing out that the bill was envisaged in 2006, Vijayan said many changes had taken place since then, including the new developments in technology.
He said non-life and health insurances was not there in 2006 and this required separate provisions. Repositories and e-commerce are the other new developments which need to be incorporated in the bill.
Vijayan said IRDA had licensed five repositories and asked all companies to digitise 5,000 policies each under the pilot project. “By end of this month, the initial pilot will be over. We will review the whole thing after that and try to solve the problems, if any.”
He pointed out that IRDA has approved customer service centres (CSCs) to sell standardised basic policies which some companies have recently developed after the regulator gave a call for universal policy. He said the policy has same features but are being marketed by the companies in different names.
“We’ve recognised CSCs as the sales point for low ticket policies, we are going to bring amended micro-insurance regulations which will be useful for companies to bring products, we are going to bring insurance marketing firms concept shortly,” he said when asked about the new initiatives IRDA is planning.
Earlier addressing a conference on “digitisation and enhanced foreign direct investment”, organised by Assocham, he stressed the need for the industry to develop products that are suitable to be sold online.
He called for developing products which are affordable to majority of the population. He said digitisation offer an opportunity to companies to cut down their costs and pass on the benefits to consumers.
“Companies should come up with affordable products which can be sold to majority of the people and for that companies have to compress documentation costs, process costs, services costs and others, said the IRDA chief.
Stating that 80 percent of the population earn less than Rs.3 lakh per annum, he said the products should cater this large section.
“Affordable products and simple process is the only way to increase insurance penetration in the country. The product should be sold to the last person. Digitisation has given the golden opportunity to make the dream true,” he said, describing insurance as the business of volumes.
“Digitalisation is a modern exercise which will reduce costs of operation thereby benefitting the customers, it needs some impetus, some regulation changes, IT Act has already recognised many of the things and we also want to bring it in the insurance sector,” he added.
P. Nandagopal, chairman, Assocham National Council on Insurance and MD & CEO, IndiaFirst Life Insurance; Tapas Nandi, CEO, J. B. BODA Insurance Brokers Pvt. Ltd.; Ravi Krishnamurthy, ED, SBI Life Insurance Co. Ltd.; S.V. Ramanan, CEO, CAMS Repository Services Ltd. and D.S. Rawat, Assocham secretary general, addressed the conference.