The insurance industry in India is looking at ways of reinventing itself in a positive light in the economy following fruitful discussions held at the 16th annual insurance conference —In Pursuit of Productivity, Sustainability and Progress—in Mumbai recently. Bouncing cheques, income tax frauds, lack of penetration into rural and social sectors, are some of the problems bugging this industry in India which is struggling to maintain its equilibrium after opening up to the private sector from the monopoly of the Life Insurance Corporation (LIC) of India in 1999.
The Indian insurance industry is now reeling further with the central government Insurance Bill, which seeks to increase FDI in this sector from the existing 26 pr cent to 49 per cent. Adding to its misery are frauds and overseas figures being an eye-opener, where statistics showed that every hour, 15 fraudulent insurance claims were reported in the UK.
HDFC Standard Life Insurance Co. Ltd MD and CEO Amitabh Chaudhry noted that bouncing cheques and other problems led to insurance companies suffering 40 per cent losses in business every year, besides the insurance business drawing a lot of negative coverage in the past. Noting that LIC had the monopoly in the past, Insurance Regulatory and Development authority (IRDA), Insurance Regulatory and Development authority (IRDA) Chairman T S Vijayan said the insurance industry opened up to private players from 1999 but did very little to benefit the rural and social sectors of India, besides the economy of the country. Stating that 3.9 per cent penetration of India was not enough, he said this industry had much potential after viewing the demography chart where 2.5 crore people would be joining the job market within the next 20 years which offered a prospective climate for the insurance sector.
In the non-life insurance sector, about one million scooters coming out yearly meant an equal number of insurance opportunities, he said while urging for viewing the number of assets being added yearly including hospital treatment. “When India opened up to private insurance players, the industry lost focus of customers and did not address the real needs. While the speed of clearing insurance claims is not bad, the focus should be on which products are bringing the premium for them. They have to be clear on which innovations they are bringing to the market so that the tag of mis-selling and the gap of misunderstanding is removed. The product should be transparent and easily understood. Insurance products should be positioned as a separate brand itself individually.”
“We should tell the Prime Minister to bring out a Jan Bima Yojna. Distribution costs of insurance products being very high is a misconception but statistics don’t substantiate this. If a company is mature and strong, then this wont be so. The insurance company can be put on even keel if the top line can go up to match fixed costs. While the policy holders’ money have to be protected, the agent too has to be protected with some remuneration being given on a monthly basis instead of commission, thus ensuring that the company too has done its social responsibility.’
Vijayan also criticized the use of paper in the present digital age of the insurance industry. “I joined the Insurance industry in 1977 and even today, people are still using paper. We need to come out of this mindset of paper use where, instead, the ease of selling insurance should happen in a jiffy. In India, things are already in place such as Aadhar card, Internet, mobile etc and the future belongs to this type of solution that is not complex but simple. An integrated solution should be given to customers that includes even after-sale services including settling claims in time. Health re-insurance is also in the picture. All metros should have re-Insurance. Innovation happens when the distribution system gets improved.”
Vijayan also noted that mis-selling made money for the insurance persons and remained a fact whether the government understood it or not. Noting that frauds are still happening, he said how far some people could go could be seen from the fact that some crooks even tried selling RBI (Reserve Bank of India) cards – when there are no such cards actually. But “gullible” people still bought them, he said, adding that this had to be tackled by the awareness authority. Highlighting “digitization” in an insurance processing perspective, he said “In Hyderabad, we started a bureau for collecting data on all vehicles insurance and found that 1.5 lakh vehicles were not insured. This data crunch alone can create a reduction in the third party premiums.”
ICICI Lombard General Insurance Co Ltd MD and CEO Bhargav Dasgupta said the Insurance industry growth is between Rs 12,000 crore to Rs 17,000 crore at a CAGR of 17 per cent and is expected to grow to Rs 4.80 lakh crore by 2027.
Alongside the vast opportunity including new penetration of 0.2 per cent in rural markets, there are 30 crore homes in the country which represent a Rs 30,000 crore opportunity, he said. The industry honchos agreed on the fact that penetration levels needed to be increased across segments, asset classes and geographies to accelerate growth -- alongside the 60 per cent awareness in the health insurance sector -- besides SMEs, rural sector and homes offering significant opportunities and yet to be penetrated. In the rural sector, tractors segment penetration was at 30 per cent while being benchmarked at 85 per cent, while in SMEs, employees’ group health is at 10 per cent and benchmarked at 75 per cent. The industry’s performance is driven by interplay of various factors. It would need to take continued action to accelerate growth and further improve profitability.
The union of all the industry captains at one place found that human capital development, technology and utilities are several areas for the insurance industry to collaborate in this regard. Highlighting “human capital” in the Indian insurance industry, New India Assurance Co Ltd CMD G Srinivasan said there is a huge challenge of skills in this industry which needs not just more people alongside its growth, but also the right type of people as “today the Industry is run by people without insurance qualifications.” But if insurance sector is seen as an attractive proposition and career to freshers and youngsters coming out of colleges, was his question. “Earlier, we had to walk a long way to get business. Even today, we are picking up general graduates and then training them. Also, we do not do enough research & development and hence have to keep trying out talent wherever we can get it. Although insurance is very complex, I can pick up someone from the market and train him in three months time,” he added.
“Hospitals don’t realize they are committing a fraud in the system. This can’t go on indefinitely and the situation has reached the extent that the fraud costs are being borne by the customer. The problem of frauds in India is huge as customers do not know they are committing a fraud. When we detect a fraud, we can only reject the claim. So there is need for a legal framework and mechanism to deal with these frauds as there is no way you can discourage them. There is a need for setting up a separate fraud bureau (by looking also abroad into frauds and solutions) to detect and prevent them from happening. The biggest issue online insurance industry is facing is frauds, not underwriting claims,” he said.
General Insurance Council Secretary General R Chandrasekaran outlined the need to build the insurance industry’s image as insurance is part of mismanagement. “There is a need to lay down qualifications for candidates entering this industry. Draw up a pyramid of skills needed for the expertise, and draw up an action plan. Where frauds were concerned, one case involving a Schengen Visa had come to us through a travel agent. What we did was to make a portal that worked successfully and led to almost nil travel fraud. Years ago, we never spoke about frauds, but today we are talking openly about it.” ICICI Lombard General Insurance’s Bhargava Dasgupta said that the depth of understanding required to be successful in the insurance industry is higher than in other sectors.
“We need to attract talent and find ways of positioning our industry better, besides going to campuses to recruit them. Increasing the attractiveness quotient is the need of the hour,” he said while noting that where technology is concerned, the opportunity is huge. “Mobiles are being used to generate business and ease of operations. Technology is great, but also a huge threat for us if we don’t collaborate well.”
Dasgupta also narrated a case where his company discovered a racket operating in the health insurance sector. This was being done in a very randomized manner but still ended up getting exposed, he said while emphasizing “We still need to have an element of collaboration as criminals are getting smarter and the insurance industry cannot catch all frauds. There are even hospitals defrauding the insurance industry.”
G Srinivasan intervened to add that “There is a need for collaboration as technology is critical, especially for building up data for the entire country which is needed. Technology is also important to get into the rural markets, besides playing an important role in the industry taking important decisions on such as natural calamities like those that occurred in Kashmir, Andhra Pradesh – especially since India is exposed to natural calamities. There is no scientific model to deal with this and you can see companies failing in this regard.”
“Frauds are taking place. I was at a conference in Zimbabwe where the chief of the Insurance Fraud Bureau narrated a case of identity theft where 30 people had their identity stolen. The fraud syndicate responsible for this made just one mistake that was identified by the IFB who tracked them down and brought them to justice. So this is one area needing collaboration in tracking frauds,” he noted.
Experian Credit Information Company of India Pvt. Ltd MD Mohan Jayaraman said: “While India is having the largest bureau in the world and 150 million consumers, the definition and way we view technology is changing today. There is now availability of technology and infrastructure while redefining and jumping to the next level. We should make use of the small capsules of data that we have, such as the ones we are now doing in the vehicles sector. When we draw the data, we can put it in an easy-to-access portal -- that can be also viewed by customers – in a transparent and beneficial way while avoiding frauds also. In the UK, there are fraud repositories today where people can go and identify cases to prevent frauds. But there is a need to bring in a well-paid person to detect such frauds.”
Jayaraman said 30 per cent of NPAs in banks had been identified as being frauds and that, in India, large scale private players came together and started sharing information about such frauds, thus saving Rs 468 crore in the process. KGFS head (Unit of IFMR Rural Channels and services Private Limited) Ravi K A said rural households owned movable assets such as tractors and bikes. “Cash flow mismatch is one of the key challenges faced by the rural sector and insurance helps them in this regard,” he said. Oriental Insurance Co Ltd Director & GM Kuldip Singh said that while there is insurance awareness in the rural areas, their psychology in general insurance was that they felt they were not deriving any benefits of the insurance policy over the insurance period.
“Insurance in the health sector is going up as people are getting benefits there. People in rural areas are more shy and require an insurance distribution channel among them where they can approach even at midnight. Also, there is a rural class which can afford insurance and these need to be approached in cases like Uttaranchal, Jammu and Kashmir, Andhra Pradesh incidents etc.”
KEC International and RPG Group (Insurance) General Manager P Chandrasekar highlighted the need to simplify and rejig the insurance process so that indemnification could be done easily. FINO PayTech Ltd Founder Member and Executive Director Rishi Gupta called for greater awareness, higher commissions, training and technology as digitization would address a lot of these challenges. HDFC ERGO General Insurance Co Ltd MD and CEO Ritesh Kumar said rural penetration could be done through schemes involving NGOs and third party distribution channels could service this sector in a better way than any brick-and-mortar office could. However, more insurance products were needed in the rural areas for the small kiosks there, he said.