He has more than four decades leadership in the insurance industry. He is a one-stop point for all insurance related queries; his knowledge and simple explanations can make any insurance illiterate, literate. We spoke to S V Mony, Past Chairman, General Insurance Corporation of India and Past Seceretary-Life Insurance Council.
The life insurance industry has seen a good growth. From a lowof 2.5 per cent of GDP, today premium income has crossed 7 per cent of GDP.
Though the general insurance sector has grown, premium income is still abysmally low at 0.65 per cent of GDP. “Even for it to reach 2 per cent, there needs to be concerted and ceaseless efforts from the insurance companies and from the IRDA,” stressed Mony.
Innovative efforts for penetration
Penetration is the most tossed about word in the industry and not much effort seems to have been taken towards acheiving it. For that you need innovative approaches to reach people, especially in the remote areas. Even today there is no adequate awareness on the need for general insurance. Mony is of the view that awareness can be spread through rural banks and through micro insurance. After all the concept of micro financing helped Md Younis win a Nobel Prize.
Penetration can be achieved by offering
simple products and proper marketing. Insurance Councils need to be entrusted with the
task of achieving insurance literacy state wise. With well-defined task, the Councils can monitor how insurance companies achieve them, said Mony
D for development
“Small broking houses can be established in many places as brokers are sought for quick insurance advice. The present regime of insu
rance-broking licence needs to be revamped to expand their work and redefine their roles,” said Mony.
On the product front, simpler and user-friendly products need to be increased: “in general insurance, there is a conceptual vacuum. Another major concern is that the companies do not take adequate efforts to get policies renewed,” said Mony. He cited the experience in motor third party insurance: every year it has to be renewed but most companies miss out on the follow up. Third party liability can be made co-terminous with vehicle registration. With the RC book lifetime insurance premium can be collected instead of the present 12 months,” said Mony.
With the ‘D’ in IRDA for ‘development’, the regulatory authority needs to have an enhanced focus towards it. Spread of insurance literacy needs to top its charts. Though companies may not come forward on such mammoth tasks, IRDA, along with Insurance Councils, should take such steps forward by making insurance a subject of education, preferably in local language.
For this to happen, Mony suggested: “like Member General, Member Life and Member Actuary, there should be a Member for Development at IRDA. His works can be focussed on development which will take care of penetration.”
The United Kingdom has a successful model for insurance penetration. Unrelenting work for over 15 years has helped the country ensuring high levels of insurance penetration. “Such proven methods can be adopted to increase penetration,” said Mony.
Claim rejection needs to be monitored
“With only 0.65 per cent general insurance pe
netration, there is a huge opportunity waiting to be tapped. But for that we need a well-drafted plan to seize it,” remarked Mony. But he cautioned of some threats that need to be addressed before taking forth such massive expansions.
The IRDA looks into market conduct misbehaviour and the defaulters are heavily penalised. But yet another aspect that needs close monitoring is the tendency of insurance companies to repudiate claims at the smallest pretext. “This is a manifestation of the fact that there are no margins left. The rates are low, claims are high and, therefore, they end up cutting everything. Many companies find one way or the other by being unreasonably strict in settling claims. If this tendency grows, it will eventually lead to anti-penetration,” cautioned Mony. IRDA can set things right by auditing claims that were rejected, analysing the background of rejection and thus ensure fairness.
Products and pricing also require close monitoring to see if they are in line with the actuarial prices. When companies offer 80-90 per cent discount, IRDA should question as to how they have arrived at the rates. If this goes un-checked, it’s a disaster waiting to happen. With key performance indicators monitored by IRDA, government and individual company owners do not recognise the need to have economic rates that will help the industry break-even and earn adequate profits.
Yet another concern that Mony mentioned was about the Motor Third Party rates. “The unrealistic ceiling on MTP rates needs to be freed so the industry can take steps to charge fair rates. The present insistence on capping the rates at unreally low levels for fear of facing truck owners is sapping the vitals of the general insurance sector. This needs urgent steps before matters become uncontrollably worse,” cautioned S V Mony.
Paperless office, easy insuring…
With opportunities galore, the industry should embark on a long-term campaign for spreading awareness. “12 years down the lane at 2025, I foresee a future where there will be thousands of brokers with proper monitoring and better systems. Getting insurance will become as simple as how we courier things at corner shops today. Claims settlement, policy renewals and other activities will be done through the electronic media and IT will play a major role in taking the industry towards a paperless future. General insurance premium volume may cross Rs 100,000 crore and life insurance will continue to grow,” envisaged Mony. -JR