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India“Insurance for all by 2047” is the goal-II

“Insurance for all by 2047” is the goal-II



So despite that, the industry has grown at this rate.

So, given some of the reforms that we're witnessing, the fact that the industry has matured a lot more and that is doing so much better than the rest at this point, I think all of us should have good reasons to be optimistic about the future of the country.

I sense that this industry should comfortably be able to grow at about 20-25 per cent compound rate for the next five to 15 years.

I am assuming that India grows at maybe close to 8 per cent.

When we started, we had 0.5 per cent penetration, so, reaching 1.5 per cent penetration in a matter of seven to eight years should be feasible from the current 1 per cent penetration.

Poludasu: More and more new products and innovative ways of dealing with the customers be it in the sourcing of the or servicing the claim settlements with appropriate support from the digital architecture have been evolving in the industry due to the leverage provided by the regulator.

Also, new players are entering the industry and all these things will help in improving the penetration and awareness across the nation.

To this account, even the Government of India is also contributing equally by pushing more and more health schemes and crop insurance.

More state governments have joined the Ayushman Bharat and the crop insurance schemes in the recent past.

This will help us to appropriately keep in place the transfer mechanism for all the infrastructure projects which have been implemented by the push of the Government of India.

With the kind of projects which are coming up and opportunities available, we will see growth coming in the engineering segment and decent growth in the motor and health segments.

Do you think the Bima Trinity will change the business?

Poludasu: Absolutely. I think when you talk about the initiatives by the regulator in terms of putting in place, we call it a Bima Trinity: Bima Vistar, Bima Vahak and Bima Sugam.

If you talk about Bima Vistar, it is a comprehensive product where the insurance industry is coming together and deriving a common product wherein people can choose as per their requirements and the pricing is also affordable.

Bima Vahak is one of the channels which the regulator is pushing, mainly with woman-centric rural penetration in view.

Bima Sugam is an online platform to which insurers will have access.

They can display their products and the pricing as well so that the customer will get to make an informed decision to appropriately pick up the right product which gives value for their money.

This will be a game changer for the insurance industry as it will help to penetrate untapped and unpenetrated markets.

Dahiya: This is an effort by the government to expand and develop a road for the insurance sector and these three being there to support is a fantastic thing. It is very supportive of the growth of the industry.

I think, we must also as an industry work towards having greater confidence in both servicing and claim aspects.

Globally, among consumers, I would say there is a trust deficit or a bit of confidence deficit and that comes from servicing difficulties.

If this part is solved, it will truly expand the industry. But, at the same time, any effort by anyone is only going to help the industry grow further.

What are the broad changes that are expected from this risk-based capital and risk-based solvency and how is that going to impact the industry?

Kumar: Currently, we have what is typically called a solvency quantity. Now, what this means is that it's a standard sort of bar for everyone.

To my mind, the risk-based capital or the risk-based solvency moves into what we call principle-based solvency.

Today, any company that has 100 per cent of a particular portfolio largely needs to keep the same amount of capital.

What will change tomorrow is that people who have a more diversified portfolio will have to keep less capital.

So, it starts giving some benefits for diversification.

Today, if 40 per cent of my portfolio is insured in a particular line of business, I may reinsure it with the 's best and this company may reinsure it with something else.

We still have the same capital relief. Tomorrow, the quality of the insurance will start making a difference. Today, in a rule-based regime, there are gaps in how much benefit you can get from insurance. Tomorrow, that opens up.

So, risk-based solvency will look at the portfolio quality, quality of insurance, and the market risk.

It will look at how well you are and what is being done on the enterprise risk management.

It is a far more holistic issue than what the present sort of rule-based solvency is.

Will the risk-based capital change the product or portfolio mix of companies?

Dasgupta: The risk-based approach could drive strategy. At the end of the day, it depends on how capital-constrained you are and whether you are forced to choose your lines of business based on your capital constraints.

However, I think it will help in allocating the right amount of capital for the right set of risks.

If one has a lot more granular business, where the volatility is less, there should be some benefits.

If one runs a book that has a high equity exposure, one should put more capital.

These are the correct measures. When one says risk-based capital, it need not mean the same for everyone.

Within risk-based capital, there is a standard model, an internal risk-based model.

An important point is the extent of diversification benefit.

During the pandemic, multiline general insurance companies had a reasonably robust year as compared to monoline companies.

The multiline companies did not dip in capital, which shows the power of diversification.

And, at the end of the day, solvency is to protect the company from going bankrupt or insolvent.

So, it was a true test of a Six Sigma event and the industry rising to the challenge.

So, these are things that a proper risk-based capital mechanism should factor in and account for.

Poludasu: In the risk-based capital framework, what we foresee is that the focus will shift from the top-line approach to the profitability approach, wherein the return on capital will play a major role in deciding the business mix of any industry, going forward.

The kind of business mix, what kind of growth will be chosen and what kind of reinsurance structures will be entered into based on the rating of the reinsurance. Also, when it comes to the investment portfolio, where you get the majority of the investment income.

Again, what kind of instruments you are deploying with your money? If it is an equity-based option, the higher capital requirement will be there.

And, if it is a motor-third party business, what they are doing, based on the quality of the book, then again the capital will get changed.

The shift from factor-based capital maintenance to risk-based maintenance is a perfect measure for the insurance industry to identify efficiencies across the price.

That will help in keeping our industry in the arena, towards a greater insurance framework.

I think all roads lead to health, is my view of the general insurance industry.

Do you see health being dominant in the general insurance industry?

Dahiya: I think all roads lead to health, is my view of the general insurance industry. It is a difficult, complex area.

Recently, there was a misdeclaration; it was a port policy.  Concluded



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