Recent IRDA norms are in the right direction: AIG India chief
At a time when a number of foreign players have either exited or are mulling an exit from the Indian insurance sector, Sunil Mehta, Country Head, AIG India, has reinforced his faith in the Indian market.
In a freewheeling discussion with Business Line, Mehta outlined the inherent strengths of the Indian economy and the impact of changing regulatory framework on the industry.
India’s growth rate has slowed down in the past few quarters. How optimistic are you about the country getting back on the growth track?
I think we tend to see too many ghosts even when none exists. Fundamentally, I think the Indian economy is in an unparalleled position with our consumption story still intact. The economy is not short of potential which we must fully realise. We must improve sentiment. Savings must be channelised into productive investments. Negativity will not help.
What according to you needs to be done to give an impetus to the economy?
A strong domestic consumption, rural health, education, connectivity, high savings, low dependency on exports, burgeoning middle class, positive demographics, talent pool and intellectual capital are some of the key strengths of our economy.
The country’s sound and robust institutional infrastructure has kept us in good stead for several decades since Independence.
However, somewhere down the line, some bottlenecks started emerging as we did not pay enough attention to re-engineering and making our institutions contemporary with the growing needs and changing environment.
One of the underlying needs is the building of an institutional infrastructure.We also need to develop community-based solutions.
How do you see the new regulatory changes, particularly in the insurance industry, panning out?
As businesses become complex, we need to work together with the regulators to build expertise for regulations. If you look at the regulatory framework in insurance industry and some of the recent guidelines issued by the Insurance Regulatory and Development Authority, I think these are steps in the right direction.
The insurance industry as a whole has had an aggressive growth over the last few years. It was time for regulator to take stock of what is happening and make changes to foster good quality growth in the sector.
I feel we will see a far more robust insurance industry emerging under the new regulatory regime.
2011-12 was a year of slow growth as far as the insurance industry is concerned. How do you see 2012-13 for the sector?
Any form of change brings with it some kind of displacement. The current set of changes in regulations in the insurance industry is good for both consumers and the companies.
This will lead to well-thought-out products, which make sense both for policyholders and the companies, efficient distribution, and appropriate pricing.
So far as growth in the sector is concerned, I do not think it depends only on regulations. It also depends to a great extent on the markets. I am optimistic about the economic growth this year, and this will take the industry on the growth path.
We have seen a number of foreign players either exiting or mulling an exit from the Indian insurance industry. Do you see consolidation happening in the industry? What are your plans in India?
Post the crisis, regulators across the world started insisting on higher capital norms. So, everyone is making far more informed investment decisions — considering not just the short and medium term but also keeping in mind their long-term business in perspective. Some amount of consolidation, therefore, is required and good for the industry.
Opening up the FDI in insurance will enable more capital to flow in and foster investor confidence.
Our long-term growth is in the core insurance business and we remain committed to that.