In a bid to attain a significant growth in the insurance sector, especially in life insurance segment, insurance regulator Insurance Regulatory and Development Authority of India (IRDAI) has pitched for small and payment banks (PBs) as well as cooperatives to help deepen the insurance penetration in the country. “As insurance investment in the sector is very low, we should involve small and payment banks as well as cooperatives to help deepen the insurance penetration in the country,” IRDAI Chairman TS Vijayan said.
Insurers and fund houses observe payment banks as a boon for the sector as opportunities of cross-sell would help deepen their reach in rural areas. “The move will attract more capital and increase sectoral penetration in the country. For any new network like payment banks, there will be an opportunity for us to grow our business and there could be some online sale opportunities through them,” he added.
The ‘in-principle’ approval of Reserve Bank of India (RBI) to 11 payments banks - the first of its kind licences for differentiated banks - can sell the third-party mutual fund and insurance products for a significant growth in such industries. “As the country’s payments market today is estimated at $15.5 trillion, the new crop of payments banks that will spring up over the next year or so, promises to change not only the country’s banking landscape but also the related industry like insurance. I think, this change will be through the mobile phone,” said an IRDAI member.
With higher foreign participation in the insurance sector as a positive move, Vijayan also said that it would attract more capital and increase sectoral growth in India. “Increasing the cap of foreign direct investment (FDI) in the sector is extremely positive step and I am sure more capital is going to come. Hence, the more capital is required to increase the penetration of insurance in India,” Vijayan said on the sidelines of Health Insurance Conference organised by FICCI on Thursday.
“Insurance companies are already in discussion. When they discuss raising stake from 26 per cent to 49 per cent, there is, of course, discussion on pricing. Once they conclude on the pricing front, it will help increase insurance penetration.”
Following relaxation in norms, some foreign players have recently increased their stake to 49 per cent from 26 per cent in their Indian joint ventures. The prominent ones are Nippon in Reliance life Insurance, AXA in Bharti AXA life Insurance, Bupa in Max Bupa Health Insurance and Sunlife Financial Inc in Birla Sunlife.
The regulator has also been making its effort to promote health insurance products by making them more popular among the masses and to make them affordable for their customers as well.
“There is the need for increased awareness about health insurance in India and making it affordable. We have asked the industry players to increase their customer base and underline the need for affordable premium for their policy holders,” Vijayan said.