“We still need to rebuild confidence in the bancassurance system so that it becomes a low-cost channel of distribution once again. Banks should offer insurance as an option to customers and not feel the need to force the customer to take this insurance. It is certainly important for banks to sell insurance, but it should not be their primary business,” Panda argued.
This statement came on the heels of similar comments by India’s Finance Minister, Nirmala Sitharaman, who recently advised banks not to force customers, especially elderly people, to invest in insurance products. Such a statement by the Finance Minister led to a drop in shares of private life insurers, as banks’ distribution is, in most cases, significant.
Relocating Burden on Insurers
To counter the mis-selling problem, the new product regulations of IRDAI now place the onus of ensuring the relevance of policy products on insurers. Customers’ aptitude to pay renewal premiums and their needs are supposed to be assessed by insurers, who must design policies that suit their requirements.
The change, proposed on behalf of policyholders, will help reduce instances of mis-selling insurance products. In matters of individual liberty, it is always better that the person directly affected makes their own decisions rather than having some external authority decide for them.
Simplified Measures for a Constantly Evolving Industry
At the same time, Panda also listed key changes in the regulatory framework that have been developed by IRDAI to support innovation and the simplification of norms. Notable changes include:
1. Reduction in Regulations: These have been scaled down from over 100 to 20, with only 15 affecting the industry and 5 being internal.
2. Simplification of Processes: Over 375 circulars have been rescinded, and more than 80 returns have been rationalised to reduce the compliance costs of insurers.
3. Increased Autonomy for Boards: Insurance company boards are now more independent in making business and operational decisions as many unnecessary regulatory clearances have been removed. This also applies to ventures such as product launches, managing expenses, fundraising, and asset investments.
4. Encouraging New Entrants: The streamlined processes provide more opportunities for new entrants in the insurance sector and foster innovation.
The EU Commission has proposed similar reforms to enhance competition in the insurance market with a focus on customers’ interests.
Is India’s Insurance Market Expanding?
While comparing the opportunities in the insurance market in India at the global level, Panda mentioned that India is currently in 10th place. However, its insurance market shows outstanding growth rates. He estimated that it could rise to the 6th place over the next 7-8 years due to regulatory changes, further market expansion, and increased insurance density.
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