The report 'Indian Insurance Industry: The Task Ahead' said there was a strong focus on expanding the reach of insurance products in the light of changing regulatory norms, particularly educating rural customers about the need and benefits of investing in insurance.
The report aimed to highlight the areas of attention, both from the industry and regulators perspective, which could provide an impetus to expand beyond the current growth in the insurance industry.
Progressive regulations and a prudent industry have collectively achieved commendable performance in all aspects of insurance. The unfinished areas, which will require their attention, includes introducing risk-based capital management reforms in the life insurance segment, determination of a task ahead in the detarriffication program for general insurance, articulation of proper reforms and industry compliance for health insurance and lastly regulatory and industry endeavor to promote deepening of markets for micro insurance, the report said, adding that reinsurance and broking will also call for some attention.
In the light of escalating healthcare costs, coupled with demand for healthcare services and the lack of easy access for people from the low-income group to quality healthcare, health insurance was emerging as an alternative mechanism for financing healthcare, providing the next big opportunity for the insurance sector. Though the premium on health insurance products had increased from Rs 6.7 billion in FY02 to Rs 40 billion in FY07, but still there is a huge untapped market.
Insurance Regulatory and Development Authority (IRDA) has also recommended the government to bring down capital requirements for stand-alone health insurance companies to Rs 500 million from Rs 1,000 million, to encourage the entry of more health insurance companies.
While health insurance is a huge potential market, there are certain challenges that cannot be ignored. The problem lies not just in strengthening the reach in rural India, but also in providing quality service in urban areas, the report said.
Ernst and Young National leader for financial services Ashvin Parekh said, ''Growing affluence levels amongst people in the urban and semi urban population coupled with the higher life expectancy are the key drivers for the health insurance segment. However, the regulators need to put in place favourable policy framework that will create a win-win situation for all the constituents in the health insurance value chain.'' The report also identifies Micro insurance as the next growth segment in the insurance sector. Micro health insurance schemes in India have not only achieved good enrolment levels among their target populations, indicating the existence of demand, but from the policymaker's perspective these schemes have also resulted in inclusion of poor. This has prompted many private companies to enter the untapped segment. The present players have been introducing the micro health insurance schemes by initiating tie-ups with Health Maintenance Organizations (HMOs), NGOs and communities.
As more than two third of India's population lives in rural area, micro insurance could be seen as the best aid to reach the poor and socially disadvantaged sections of the society. In FY08, out of total insurance premium of Rs 1,000 billion, only Rs 1.25 billion came from micro insurance. To increase the reach, emphasis is being laid on better product design, reducing distribution cost, improving premium payment mechanism and relationship building, the report added.