Non-life insurance sector will grow at 18-22% for next 10 yrs

With yet another Union Budget just round the corner, it's time to take a look at the country's insurance sector. And that's not without a reason. Life Insurance Corporation (LIC) IPO is on the cards. So is a likely consolidation in the banking and insurance sector. And not to be forgotten that the Union Budget 2021 had increased Foreign Direct Investment (FDI) limit in insurance from 49 per cent to 74 per cent and India's Insurance Regulatory and Development Authority (IRDAI) had announced the issuance, through digilocker, of digital insurance policies by insurance firms. How all these things, taken together, and many more other developments would push the Indian insurance sector- that remains the moot question at this point in time. Speaking to Bizz Buzz exclusively, Deepak Choudhary, founder & MD, Shrigoda Insurance Brokers Ltd, and MCCI Chairman for Insurance Committee, has taken a 360 degree view on the Indian insurance sector

What will be the overall impact of LIC's IPO? How would it facilitate and fuel consolidation in the banking and insurance sector?

LIC holds an important part and position in India's financial sector. Therefore its IPO will definitely have a huge impact in the public market, especially on the policy holders. The authorities are in the process to appoint merchant bankers for appropriately launching the IPO. After this, 60 per cent of the insurance business will be with listed companies. There will be a boom in the banking and insurance sector. As many as 10 banks are being proposed to be selected for the IPO and they will be given scores on the basis of various parameters such as past experience in handling IPO, expertise in life insurance, qualified team members, perfect marketing strategy, strength in drawing retail participation strategy, and global distribution capabilities.

Union Budget 2021 had increased FDI limit in insurance from 49 per cent to 74 per cent. IRDAI has announced the issuance, through Digilocker, of digital insurance policies by insurance firms. How do you see such moves pushing the Indian insurance sector?

The increase in the FDI limit in the insurance business from 49 per cent to 74 per cent is a very positive move in the insurance sector. It is a much needed growth impetus to the sector. The ongoing pandemic has had far reaching effect on all of us, impacting lives, livelihood and businesses. This will also have an impact on job creations. More investments are likely to trigger expansion plans for insurance companies, eventually leading to more job creations.

Life insurance is a critical component in ensuring the nation's financial protection apart from fuelling the growth of the economy. There is no doubt that impactful tax relief measures can result in higher life insurance uptake across the country. So what are the kind of tax relief measures you are looking at from the forthcoming budget?

The increase in 80C from Rs1.5 lakh to Rs3 lakh is the first relief measure that can be taken care off, lowering or abolishing of GST on premium, compulsion of term policy as per ITR may also be done. There should not be only one basket of 80C like for instance there should be 80A for life insurance for Rs 1.5 lakh. This will increase volume and awareness for insurance and GDP will grow.

Many people think that the future looks promising for the life insurance industry with several changes in regulatory framework which will lead to further change in the way the industry conducts its business and engages with its customers. Do you subscribe to the same view? If so, at what rate, do you think life insurance sector would grow over the next three-four years?

In my opinion, life insurance will grow at a pace of 10 per cent to 14 per cent per annum for the next 10 years. But more revolution and reforms are required. So are more awareness and even more transparency.

What about non-life sector?

Non-life sector: This is the sector, I believe, will grow at a pace of 18 per cent to 22 per cent for the next 10 years, going by the GST and other government plans post pandemic. The business from kirana moves into departmental stores, or may be into app-based market place. This is because the new generation believes in technology and they feel time is crucial. These make things more cautious on corpus for insurance as provision. Also incidences are more common in terms of losses. So it's always better to take precautions beforehand and so non-life policy like fire/food/burglary/marine/liabilities are taken by business houses.

What about the idea of making health and home insurance mandatory for families with a household income of more than Rs10 lakhs?

Yes I agree if this happens, but why Rs10 lakh and not Rs 5 lakh? As, if we visit or board to visit for any diagnosis for any disease, nearly three years of our savings on an average are spent. So in order to protect it, one must buy health insurance. And regarding home loan, it's mandatory. But everyone should be aware of the terms and conditions and choose the right policy before investing.

There are four general insurance companies in the public sector - National Insurance Company Ltd, New India Assurance Company Ltd, Oriental Insurance Company Ltd and the United India Insurance Company Ltd. How do you see their future in the wake of The General Insurance Business (Nationalisation) Amendment Act, 2021, allowing privatisation of State-run general insurance companies?

My belief is that why have unnecessary competition among ourselves, it's better to merge all into one and act as a stronger company in India. A single platform becomes easier to get in at easier rates as overhead costs are anyways low there. Also reserves will be higher for them and risk taking capacity will also increase for the company.

Different Insurance companies are trying to leverage strategic partnership to offer various other services. ICICI Lombard's collaboration with Vega, ICICI Prudential Life Insurance' partnership with NPCI Bharat BillPay, a subsidiary of National Payments Corporation of India (NPCI) are few cases in point. There are many such examples. How much did such strategies pay off? Were they proved to be effective?

I welcome this strategic steps from the insurance companies as this will make them more tech friendly and more access will be allowed to end cosumers - both in terms of payments/claims/services and others. But at the same time, insurance in India is more marketable on mouth publicity. Also we should be stronger in technology as online trading and investment movement has become much stronger for clients, these days.

Do you see the scope of IoT in Indian insurance market to go beyond telematics and customer risk assessment? How do you see the growth of InsurTech startups in India?

Yes IoT will help us - companies and their various bodies to improve the speed of data collections and also sharing the same with their/our customers. We are expecting this industry to grow at a pace of 55 per cent to 60 per cent every year till 2030. The startups are getting increasingly higher boost as insurance companies are trying to improve and implement IoT and have a huge budget for it, this makes funds available to them and also give them the scope to develop more.