Insurance sector comes of age

Santosh V Perumal & Raj Kumar Ray

Quality of life in India may not have improved perceptibly in a year, but the quality of life insurance has definitely undergone a sea change in 2002, as competition forced insurers to offer more benefits, build awareness among masses and prompted the Centre to consider hiking foreign direct investment ceiling to 49 per cent.

What came as a boon for insurance was a paradigm shift in consumer perception and preference due to a rainbow of benefits for exigencies like critical illness, disability and accidental death, which were hitherto unthinkable.

The unit-linked and single premium policies have caught the fancy of wide cross-section of investors, who now find the returns on insurance policies more attractive than that offered by bonds, mutual funds and even equities.

Adding to this, professional attitude of the agents made possible through mandatory training formatted by the Insurance Regulatory Development Authority provides the consumers the much-needed awareness about the need for insurance.

Gripped by the insecure feeling in a regime when interest rate on savings are coming down, assured return schemes are vanishing, equity markets remain volatile and the threat of loosing tax rebates looming large, Indians seem to have found some sense of security in insurance policies.

Viewing the macro gains, the Centre was forced to toy with the demand of hiking foreign investment cap in insurance to 49 per cent from 26 per cent as enshrined in the IRDA Act.

When the N K Singh committee on FDI strongly pitched for hike in FDI cap, IRDA chief, N Rangachary, blatantly shot down such a move as it might sideline Indian promoters to a minority.

Amid confusion over whether private insurers were reliable for nurturing long-term savings and should foreigners be given higher stake, the year also marks a "cold fusion" of insurers and bankers through 'bancassurance' tie ups after Insurance (amendment) Bill was passed. Till date insurers had to rely on the selling skills of a team of untrained agents.

Now, insurance distribution would be a more serious business as banks would join the channel as corporate agents.

The year also witnessed private players slowly eating into the market share of Life Insurance Corporation although the insurer posted over 137 per cent jump in its business.

LIC's premium income was Rs 14,844 crore (Rs 148.44 billion) last fiscal from the sale of 2.32 crore (23 million) policies assuring a sum of over Rs 1,92,500 crore (Rs 1,925 billion).

According to Rangachary, LIC still commands over 96 per cent of the Indian life insurance market and is likely to do so in the coming years as well.

Reasons are obvious for the indomitable stature of LIC as it settled over 85,00,000 cases, which is the largest number settled by any insurer anywhere.

Apart from the 2,100 branches and a network of 630,000 agents the insurance monolith is all set to grow exponentially by leveraging its bancassurance ties with Corporation Bank, Oriental Bank of Commerce, Indian Overseas Bank and other major public sector banks.

-- PTI

2002: The Year That Was