Interview:


K Sanath Kumar, GIC Re


The Indian insurance market: what does it need?


K Sanath Kumar, acting chairman and managing director, GIC Re, describes the Indian government’s social insurance schemes and the country’s fast- growing economy.


“D evelop products that understand, simple to


are easy to administer,


and if the need arises, easy to claim from.” This should be the cardinal principle for any insurance industry, especially in markets that are poorly penetrated


as far as insurance


is concerned. Plus, in an emerging market such as India where insurance awareness and penetration is still far below the global benchmarks, the focus should be the customer. This cardinal principle and the desired focus


have been spoken about a lot but no-one has walked the talk until now. Over the last year the government of India has not only walked the talk but also with its variety of simple yet very effective social insurance schemes has created an ecosystem that can enable a quick jump in insurance penetration in the country. India is a fast-growing economy and in


far better shape than many other developing and developed economies. Also, since the year 2000 when the Indian insurance industry was opened up for private players with foreign direct investment (FDI) of 26 percent, the industry has registered an uninterrupted impressive growth rate in double digits. This impressive performance is not reflected on the ground, however. During 2014/15 the Indian general insurance industry wrote a gross premium of


₹ 86,000 crore ($13 billion) and during 2015/16 we are optimistic of touching the magical


figure of ₹ 1 lac crore ($15 billion). However, almost 70 percent of these impressive figures


is contributed by motor and health portfolios, much of which is mandatory or corporate- driven. The track record of householders’ policies, products for small and medium enterprises (which can be a real determinant of insurance penetration) and nat cat protection and much more, is very unsatisfactory.


Future growth The Indian economic scenario currently offers a very optimistic picture. Sentiment all around


K Sanath Kumar


“To be successful in the Indian market, any insurer will need to innovate simple and needs- based standardised products.”


is very positive and with improving standards of


lifestyle and increasing income levels, the


ability of people to pay their premiums is also on the rise. The potential is virtually unlimited. Further, during the last decade and a half


since 2000 when the FDI in the sector was limited to 26 percent, we had 28 companies operating in the non-life


insurance sector.


Now with the limit for FDI being raised to 49 percent, competition is bound to heat up. New players, to build up their customer base


and benefiting from the experiences of their seniors in the field, will offer simple and easily administered products in the market. This


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will also boost insurance penetration in the country. Growing awareness about natural catastrophes that are growing in frequency and ferocity due to climate change will also spur insurance penetration. The recent launch of universal insurance policies and very simple social security schemes by the government of India has created a perfect ecosystem that works on the principle of India needs insurance, and Indian people need insurance, and we need to provide them this in the most acceptable form. Indian insurers also need to develop


innovative and cost-effective IT-enabled delivery systems to reach out to customers everywhere. Mobile-based payment systems, the new breed of payment banks, the Digital India Initiative of the Indian government and social media all need to be exploited. Out of 310 million internet users, more than 60 percent access it through mobile phones and it is for insurers to use these platforms to reach out those not yet included. Insurers also have to add wealth to their


enterprises: mergers and acquisitions activity will start as the market matures. Solvency II may be around the corner and insurers also need to gear up for that, although there is yet some advantage of time. To be successful in the Indian market, any


insurer will need to innovate simple and needs- based standardised products. While integration of existing channels


of distribution with a


human face and the online mode will create a winning combination, neither of the two alone will be able to make any impact on the customer. The focus should be on ‘to catch them young’ so that we are able to develop the first generation of insurance-savvy Indians, and to promote not only financial inclusion but financial awareness among the Indian population. n K Sanath Kumar is acting chairman and managing director of GIC Re. He can be contacted at: cmd@gicofindia.com


DAY 1: Sunday September 13 2015 | MONTE CARLO TODAY | 17


13.09.15 SUNDAY


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