1273619 Rakesh Uppal MBA 4 B Q 20 Comment on Regulatory trends i.e. mandated regulatory changes by the IRDA to promote a competitive environment in both the life and non-life insurance sectors

Comment on Regulatory trends i.e. mandated regulatory changes by the IRDA to promote a competitive environment in both the life and non-life insurance sectors

Introduction

The Indian insurance industry seems to be in a state of flux. After a decade of strong growth, the Indian insurance industry is currently facing severe headwinds owing to:

• Slowing growth
• Rising costs
• Deteriorating distribution structure
• Stalled reforms

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Life insurance industry in India

According to Swiss Re, India’s life insurance market was ranked at number 9 among 156 countries in terms of premium in FY11; India’s total premium adjusted) while the total global premium grew by 3.2%. The sector has grown at more than 24% CAGR over the last 10 years. The number of policies issued, declined at a rate of 22.61% to 48.2 million in FY11 from 53.2 million in FY10.

Non-life insurance industry in India

According to Swiss Re, India’s non-life insurance market was ranked number 19 among 156 countries in terms of premium in FY11; India’s total premium in adjusted) while the global total premium grew by 2.1%. The sector has grown at a CAGR of 16% over the last 10 years.

The number of policies issued increased at a rate of 16.52% to 79.3 million in

FY11 from 67.5 million in FY10. million in FY11 from 67.5 million in FY10.

Discussion

Despite strong improvement in penetration and density in the last 10 years, India largely remains an under-penetrated market. The market today is primarily dependent on push, tax incentives and mandatory buying for sales. There is very little customer pull, which will come from growing financial awareness and increasing savings and disposable income.
In the long run the insurance industry is still poised for a strong growth as the domestic economy is expected to grow steadily. This will lead to rise in per capita and disposable income, while savings are expected to be stable.

The IRDA has mandated regulatory changes in order to promote a competitive environment in both the life and non-life insurance sectors. 

The IRDA has recently dismantled the third-party liability pool in motor insurance and replaced it with the declined risk pool. While it is likely to have widespread implications on the size and loss ratio of the pool, the move is expected to drive the industry toward risk-based pricing. 

Recent regulations pertaining to cap on ULIP charges and increase in the lock There is enough potential for positive growth of the Indian insurance industry given the focused efforts of the regulator, government and players in the backdrop of rising demand for insurance. The industry

does, however, face numerous challenges primarily on product designing, distribution and regulatory front. The following sections throw light on typical challenges faced by the life and non-life industry. in period, translated to reduction in overall distributor payouts, which in turn reduced the overall contribution of ULIPs to new business premium. With a cap on surrender charges, insurers showing

 to be able to sustain the market.

There is enough potential for positive growth of the Indian insurance industry given the focused, synergistic efforts of the regulator, government and industry players in the backdrop of rising demand for insurance. The industry does, however, face numerous challenges primarily on the product designing, distribution and regulatory front. The following sections throw light on typical challenges faced by the life and non-life industry.

Conclusion

Insurance growth drivers in India

The demand for insurance products is likely to increase due to the exponential growth of household savings, purchasing power, the middle class and the country’s working population. Listed below, are the various underlying growth drivers for India’s insurance industry:

• Growing of the financial industry as a whole
• Growth of life and non-life industry
• Promoting innovation and removing inefficiency
• Competition and orderly growth
• Growth of specific insurance segments such as motor insurance

There is enough potential for positive growth of the Indian insurance industry given the focused, synergistic efforts of the regulator, government and industry players in the backdrop of rising demand for insurance. The industry does, however, face numerous challenges primarily on the product designing, distribution and regulatory front. The following sections throw light on typical challenges faced by the life and non-life industry.

So there is much work done by the IRDA for improving the and promoting competition in both the sectors life and non- life which will benefit all the stakeholders and the country as well.