26/02/2015 5:52 PM IST | Updated 15/07/2016 8:25 AM IST

Budget Can Help Usher E-Revolution In Insurance Sector

Hindustan Times via Getty Images
NEW DELHI, INDIA- NOVEMBER 24: Prime Minister Narendra Modi walks with Minister of Urban Development and Parliamentary Affairs Venkaiah Naidu, Minister of State Skill Development & Entrepreneurship (Independent Charge) Rajiv Pratap Rudy, Dr. Jitendra Singh, Minister of Science and Technology during the opening day of the winter session of Parliament on November 24, 2014 in New Delhi, India. The Narendra Modi government, which has promised big reforms in its first budget, is looking to push the Insurance Bill as well as the Goods and Service Tax Bill in the month-long winter session that begins today. (Photo by Vipin Kumar/ Hindustan Times via Getty Images)

The mood in the insurance sector is on an upswing after passing of the ordinance bill last December where FDI was increased from 26% to 49%. This was a big demand from the insurance sector and it has been duly fulfilled by the government. This is a positive move towards ensuring infrastructural growth and penetration of insurance sector. Needless to say, amidst this positive and pro-growth environment, the expectation from Budget 2015 is quite high.

There are a few things that are critical to the growth of the insurance sector and if the government can assist with the same through Budget, then it will be quite useful for the industry.

Facilitate Customer-centric Approach

In this industry, the engagement between the buyer (customer) and seller (insurance provider company) extends over many years and involves stressful situations (you claim in a distress situation whether illness, accident, personal loss, etc.), thus the relationship between the two is paramount. A customer-centric approach is imminent. Government can bring about the e-revolution, as is underway in other sectors, for example gas distribution channel. Currently an insurance buyer has to undergo a lot of paperwork, identification and a double lot of paperwork while making a claim. E-policies and e-claim process can go in a long way to bring them under one umbrella of financial inclusion. This will also break down the mental block of a common man who thinks insurance is a complicated process and it is best to stay away from it. A common KYC, in fact a better modus operandi will be having an e-KYC, has the potential to revolutionize the financial inclusion plan for all Indian citizens.

Establish Pro-growth Environment

The demand to set up processes to facilitate speedy growth of insurance sector is strongly voiced. The current Insurance Act clubs together insurance providers and distributors, wherein the interest of distributors gets negatively affected. A separate set of regulations to facilitate distributors will bring a positive change in the overall insurance sector. The need of the hour is to make the sector service-oriented, make processes easier, encourage product innovation (why someone should pay a same premium for health insurance in cities like Delhi & Jhansi when the healthcare costs are very different), reduce or remove redundant regulations, provide auto approvals for new insurance products that meet the basic guidelines (will help save lot of time) and employ niche segmentation. All this together will build the perfect eco-system for insurance in the country. Budget 2015 can address some of these issues and bring a change in attitude, steering it towards fast-paced growth.

Increase penetration of Insurance in Indian Markets

Currently the penetration of insurance sector stands at a mere 4%. Consider this in the background of Global Peace Index's list of most dangerous countries where India stands at quite a high position of number 19. The reasons behind this are poor public healthcare, crimes against women, and terrorism to mention a few. Thus, the importance of insurance penetration can't be undermined. The scope of growth is enormous and the industry needs just the right impetus.

Growth will happen for sure but the pace of growth can be decided by the government. A positive and rule-based economy will ease out the creases thus pushing the insurance industry onto fast gear.

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