Asks companies to word contracts simply, persist with winning products
Insurance companies must explore the possibility of sharing their agents to realise the full potential the sector presents, J. Hari Narayan, Chairman, Insurance Regulatory Development Authority, said.
The remuneration given to agents is not attractive enough to draw talent. Then, can agents be allowed to work across companies? “I do not have definite answers to it, but questions are important. I am hopeful that answers will be found to this,” he said at an Insurance Summit organised by the Confederation of Indian Industry.
Insurance companies, he added, must focus on their core business of providing protection and also consider providing annuity.
Annuity refers to a business model where a company accepts money from an individual systematically over a fixed time period and on on maturity, pays a lumpsum along with interest. He stressed that growth for insurance companies will come from protection and annuity.
The burden of paying annuity from 2019 will fall on the insurance sector since the Government has stopped pension schemes.
The Government launched a contribution-based new pension scheme in 2004. “Is the insurance sector geared to face this challenge?” asked Hari Narayan. The IRDA chief said LIC is the sole player in the annuity business and there is a high degree of risk in this since all the business is concentrated in a single player. It also robs the customer of choice, he added. He urged companies that provide pension to also take on the burden of annuity.
He said that in the life insurance space there are 800-900 products. Most of these have not been able to achieve the intended targets. “So, why is there this compulsion among insurance companies to introduce more and more products?” he asked.
There is a need to pick winning products from each category and then persist with that, he said. If there is not enough difference in each succeeding products then it will be like “selling old wine in a new bottle,” he said.
Insurance contracts, he said, are written in very complicated language which the common man cannot understand. The companies must relook the way insurance contracts are structured, he added.
He expects the next phase of growth to come from the non-life segment. “The existing insurance companies will have to recast themselves to take advantage of it.”