New Delhi: The insurance industry, which has been hit by money laundering allegations, is looking for the revival of the economy for a pick up as elusive political consensus continues to hold up the raising of foreign investment limit in the sector.
Lack of political consensus kept the long pending Insurance Bill a pipe-dream in a year that saw allegations of money laundering being levelled against some operators, an increase in investment exposure and the industry's continuous fight against the slowdown.
It expects that the regulatory moves to allow banks to act as insurance brokers in 2014 may give a leg up to growth.
Sectoral regulator Insurance and Regulatory Development Authority (Irda), however, may not issue any more major regulatory guidelines in the coming year.
"Currently we have sort of reached a plateau on regulation making and we are looking for implementation of these in true spirit especially about the TPAs and how the customer is treated. All most all regulations are in place," Irda Chairman T S Vijayan said.
The government, despite putting much effort to get the Insurance Bill that seeks to raise foreign investment limit to 49 percent from the existing 26 percent, might gather support of the opposition.
The government had introduced the Bill in the Rajya Sabha in December 2008 to improve and revise laws relating to the sector in the wake of private participation.
The insurance amendment Bill is an omnibus legislation to change parts of three Acts: Insurance Act, 1938; Insurance Regulatory and Development (Irda) Act, 1999, and GeneralInsurance Business Nationalisation Act.
Meanwhile, during the year, there were allegations levelled against three life insurance companies for money laundering in connivance with leading private banks -- ICICIBank, HDFC Bank and Axis Bank.
Some officials of HDFC Bank, ICICI Bank and Axis Bank, a sting operation alleged, had offered to launder unaccounted money through insurance schemes. Irda had sought explanations from CEOs of three life insurance companies -- HDFC Life, ICICI Prudential Life and Max Life.
That apart, Irda has proposed - subject to RBI approval - to allow banks to act as brokers and sell products of more than one insurer so as to increase the penetration of thesector across the country.
"We expect these new regulations to lead to much deeper penetration and enhanced distribution for the life insurance industry in general, thereby contributing to a greater sense of security for all Indians, and also serving important long-term economic objectives for the nation," Reliance Life Insurance CEO Anup Rau said.
The business of the insurance broker will have to be carried out in such a manner that not more than 50 percent of the premium emanates from any one client.
Not only industry but even Finance Minister P Chidambaram had favoured the idea of banks acting as brokers for selling products so as to increase the penetration of insurance.
At present, the policy on Bancassurance is one bank one insurance company (one life and one non-life).
According to Rajesh Sud, Managing Director, Max Life Insurance, the sector will witness a turnaround in the coming year on the back of many regulatory changes and expectedrecovery in the economy.
"I believe, the industry has vast potential for growth in the country and it is getting into a mature and steady growth phase, I expect 2014 will see early signs of turnaround in the Life Insurance industry," Sud said.
Come new year, all insurance companies will re-launch traditional products in line with regulatory guidelines.
Insurers are yet to take a call on premium following the changes.
"Though the new guidelines will reduce product margins and impact distributor commissions, I think the market is just about entering the next cycle, though hard to predict whetherit will be a downward or an upward cycle and which way it will go," PNB MetLife India Managing Director Rajesh Relan said.
The regulatory changes in product guidelines have not only resulted in change in product designs and features but also require large changes in the systems and operations aswell as a significant investment in distributors' training, Sud added.
In February, insurers were allowed to hold up to 15 percent stake in a company, up from 10 percent earlier. The decision was in line with the growing size of funds managed byinsurance companies.
The life insurance industry had recorded a new business premium income of Rs 1,07,010.68 crore during 2012-13, as against Rs 1,14,232.72 crore in the previous financial year, down 6.3 percent.
However, premium collected by life insurance companies rose by 6.5 percent in the April-September period to Rs 50,056.56 crore, as against a year-ago.
During 2012-13, both life and non-life collected premium of Rs 1,76,091.39 crore, as against Rs 1,72,352.43 crore in the last fiscal, registering a marginal increase.
Despite slowdown in the industry during the year, a new player entered the field, with Irda giving approval to one general insurance companies -- Cigna TTK Health Insurance Company Ltd.
Besides, one existing life insurance companies witnessed change in the shareholders. In case of DLF Pramerica Life Insurance Co Ltd, real estate player DLF exited by selling its74 percent stake to Dewan Housing Finance Ltd.
There are 52 insurance companies operating in India; of which 24 are in the life insurance business and 28 are in general insurance business. In addition, GIC is the solenational reinsurer.
Updated Date: Dec 21, 2014 01:05:42 IST