Dear Comrades,
(Release ID :84868)
Text
of the Speech of the Union Finance Minister Delivered During his
Meeting with the Chairmen of Public Sector Insurance Companies
Following is the text of the speech delivered
by the Union Finance Minister Shri Pranab Mukherjee
delivered during his meeting with the Chairmen of Public Sector Insurance
Companies here today:-
I am happy
to be with the Chairmen of PSU Insurance Companies today for reviewing their
performance in 2011-12, resolving common issues and setting out broad strategy
framework for the insurance sector during 2012-13 onwards.
On the economic front, as I pointed out during
my meeting with the CEOs of Public Sector Banks and Financial Institutions yesterday,
we faced a challenging situation in 2011-12.
On Insurance Sector front too, there were natural calamities and
catastrophic events in Japan, Thailand and elsewhere during the year which have
affected Indian Insurance Companies.
I hope that the trough in the rate of growth
cycle is behind us. Specifically in the Insurance
Sector, I have had detailed interactions with IRDA during its last Board
Meeting held on 4th April, where number of regulatory issues were discussed
at length and I am hopeful that interactive process with the insurance
regulator and other such associated issues will be streamlined soon. I am,
likewise, happy to be here interacting with all PSU Insurance Companies after
more than 2 years and I am sure it will set a path of
healthy and sustainable insurance growth.
We have travelled a long distance since the time Insurance
was nationalized in 1956. The growth in premium underwriting has
witnessed strong CAGR of 18.85% since 2001. Insurance penetration and density has
improved since then. The public confidence in the
industry is more positive today then it was earlier. Asia,
excluding Japan, will contribute nearly a quarter of global growth in next 5
years and within Asia, India will be the fastest growing general insurance
market during this period with an average expected growth of 15%. A welcome feature is that the share of life
insurance premium in the gross domestic savings with the household is about 18%
and is increasing over the years. There are strong underwriting growth drivers.
The demand for insurance products is likely to increase due to growth of
household savings and purchasing power. I
wish to highlight these factors to drive home the fact that despite occasional hiccups, the future also looks bright for the
insurance sector.
We
are all aware that the insurance sector has been contributing immensely to the infrastructure
development of the country. The total
investments of the PSU insurance companies in infrastructure (as on 31st
March, 2012) were to the tune of Rs.14.26 lakh crores, of which LIC alone has
invested Rs.13 lakh crores.
In Life sector, LIC continues to be the leader and
despite it being an open market, LIC has a market share of around 81% in terms
of new business policies and 71.3% in terms of new business premium during
2011-12. I congratulate LIC for being the trust factor among the people. LIC
also is successfully implementing Social Security Schemes – Aam
Aadmi Bimay Yojana and Janashree Bima Yojana (JBY). I would advise
LIC to work out “Kisaan
Bima Yojana”, a life
insurance scheme for the farmers on the lines of JBY where the coverage can be
extended up-to the age of 65 or 70 years and the additional premium could be
borne by the farmers covered under the scheme.
In agriculture
sector, I have noted the progress in terms of coverage of farmers under
agriculture insurance. However, the number of non-loanee
farmers has been coming down over the years. Agriculture Insurance Company of
India Limited (AICL) should work for ensuring not only bringing all loanee farmers under the cover but also as many non-loanee farmers as possible. I feel this is the most marginalized
group requiring agriculture insurance and should be covered on priority.
Reinsurance
is an integral part of the insurance sector and GIC is the sole Indian
reinsurer in the country. While the loss of Rs 2490 crores during 2011-12 is
largely attributable to the natural catastrophes in Japan and Thailand and also
due to the provisioning on account of motor pool, the larger policy issue of
minimization of exposure risk, diversification of risk, due diligence while
assessing the country specific risk etc remains and I am sure GIC is making all
necessary efforts in this direction.
I
have few concerns in the General Insurance non-life sector where the insurance
market is structurally challenged in terms of profitability. India is the only
country in Asia with a combined ratio of 105 and above consistently during the
last 5 years and all the four PSU General Insurance Companies have been largely responsible for such a trend.
The
combined ratio for four non-life PSU insurers, which was in the range of 136%
to 140% during 2010-11, has come down and now is in the range of 120% to 129%
for non-life general insurance companies.
There is a desire in general insurance PSUs to grow at a faster rate and
be the market leader. The growth rate in
GDPI for all four companies, during last year was 21.39% with a market share of
55.76%. While the emphasis on growth in
premium is understandable, what is however concerning is the underwriting
losses which stood at a whopping 6,134 crore during 2011-12. The overall profitability clearly is driven
by the investment income, with continued deterioration in the core business of
premium underwriting. It is well understood that growth in top line cannot be
at the cost of bottom line. The Ministry
has suggested certain welcome steps to curb the unhealthy competition in
underwriting premiums and it will help restore the sustained business growth.
I
complement the PSU insurance companies in reaching out to the people in
far-flung areas. However, I have pointed out earlier in my Zonal Meetings the need to cover all the remaining un-served areas
especially district headquarters.
You will agree that the per capita income has grown over the years and a
large number of people in smaller towns are saving and are looking for
insurance products. It is in this regard that we have decided that LIC as well as PSU
general insurance companies shall necessarily have a presence in all the towns
up to Tier IV classification as per census.
Such an early foothold will be advantageous in business sense also to the
PSU Insurance Companies and It should be done without
any further delay. A reorganization of
the existing loss making Branches, especially those of non-life general
insurance companies and also de-congestion of branches which are concentrated
in metros can help this expansion in un-served areas.
We
have recently initiated, as part of Financial Inclusion, a detailed exercise to
ensure the presence of Business Correspondents (BCAs) in all the revenue
villages with a population of two thousand and above. It
only makes business sense for insurance companies to appoint these BCAs as
insurance agents to tap the huge potential of insurance coverage in rural areas.
Similarly, other
mode of distribution such as Bancassurance must be
adopted in a big way. Out of the available 80,000 bank branches, less than
7000 are being used by PSU insurers and we need to scale up Bancassurance
immediately.
In
order to tap the growing segment of insurable population who is IT savvy, you all must immediately take the e-governance route
and ensure that all your policies, both new and renewal, are available online. This will
also enable them to have direct access with you and dependence on brokers will
come down. And in the process, some of your savings must be passed on the
customers through discounts. E-governance, issuance of e-policies and e-payment
are no longer options but have become a necessity if
one is to survive in the sector.
I
would also like to highlight the need to
ensure that claims are settled in the shortest possible time frame. I
notice that large numbers of claims, especially in the General Insurance
companies, are pending for final settlement. You may like to take up a drive to ensure that this pendency is
minimized.
We
have a long way to go if we have to grow on a sound footing. Policyholders trust is of utmost importance
and all our functioning should be geared up with this philosophy. There is also
a need to have a balance between growth and profitability and our strategy in
coming years should be guided accordingly. I have full confidence in all of
you and your team and hope that PSU companies will continue to be the leaders
in their respective segments and in a financially sound and healthy manner.
*******
DSM/SS/GN
(Release ID :84868)
