IRDAI : Insurance sector needs
Rs 50,000 cr capital each year to double penetration
In order to double
insurance penetration in the country, there is a need to infuse an additional
Rs 50,000 crore in the sector every year by existing players by way of
ploughing back their profits as well as through new investment, Debasish Panda,
Chairman, Insurance Regulatory and Development Authority (Irdai) on Friday.
After March, I intend to
meet the chairpersons of all the insurance companies to drive home the point
that they have to factor this and start planning to infuse more capital. I am
glad some players have already started around that , Panda said at a CII
insurance event.
The Rs 50,000 crore
figure was arrived at by making assumptions on the country s gross domestic
product (GDP), inflation, and how the world GDP will grow during this period,
Panda explained.
We want to double the
penetration and for that one needs capital to come into the sector. We have
taken assumptions on how the GDP will grow, what kind of inflation will be there,
and what will be the world GDP and tried to do some kind of modelling and
roughly arrived at the fact that if Rs 50,000 crore is committed to the sector,
then we will be able to double insurance penetration in 5-7 years , he said.
Insurance penetration in
India during 2021-22 remained the same as in 2020-21 at 4.2 per cent, with life
insurance at 3.2 per cent, and non-life at 1 per cent. But insurance density
increased from $78 in 2020-21 to $91 in 2021-22. While insurance penetration is
measured as the percentage of insurance premium to GDP, insurance density is
calculated as the ratio of premium to population (per capita premium).
Panda also made a pitch
to the conglomerates and individual investors present in the country to invest
in the insurance sector. I would like to reach out to the conglomerates who
are present in this country and individual investors who are interested to
invest their money , the Chairman said.
"If you look at the
return on equity (RoE) of insurers, the top five insurers have an RoE of around
20 per cent. The average RoE is around 16 per cent and 14 per cent for the
non-life and life insurance sectors respectively. This is the time when funds,
which are available should get channelised into the insurance sector",
Panda said.
Meanwhile, Panda urged
the insurance companies to widen their distribution network to reach the
underserved and unserved sections of the country s population. He asked them to
look beyond the scheduled commercial banks and perhaps focus on non-banking
finance companies, cooperative banks, microfinance institutions to include them
as corporate agents because they generally tend to the niche segments.
What we are saying is
insurers can have more distribution points to reach the unserved and
underserved areas. For example, micro-finance institutions work in small
geographies. They can be roped in as corporate agents , Panda said.
www.business-standard.com
dt. 24.01.2023