Regulatory and Development Authority of India (IRDAI) chairman T S Vijayan today said they will soon take a view on extending long-term products to health insurance
sector as the same was introduced for the first time for the two-wheeler insurance
earlier this year. A committee constituted by the insurance regulator on health insurance has been correctly evaluating the proposal, according to him.
"After the two-wheeler insurance, may be in health we should have longer term policies where it is possible to offer. However, claim experience has to be looked into because that is vital for longer term offerings,"Vijayan said at an event organised by ICICI Lombard General Insurance Company. The company organised the event marking the sale of one lakh long-term two wheeler policies after launching the product this year.
Vijayan said insurance penetration has to increase in the country as the extent of risk cover is a measure of its stage of development. "In the US almost 80% of the assets are covered by insurance where as it is just 7% in India. One has to dip into his lifetime savings if some thing happens while there was is no insurance to take care of that risk," Vijayan said. He said there was an unmet need for long term products in non-life sector. In general insurance space the collection of premium and risk cover is limited to one year till last year.
ICICI Lombard has sold 1 lakh policies of its long term product, which offers 2 or 3 year option to two-wheeler owners, after it had started actively marketing the product in July this year. The company managing director and CEO Bhargav Dasgupta said about 40% of its on-line two-wheeler insurance sales were coming from the long-term product and this kind of response in such a short span suggest a new trend in this segment.
Long term products are going to be a game changer in two-wheeler segment where renewal of insurance was a major issue because of the small-ticket size of the premium among other factors, according to him. Besides providing convenience of longer tenure policy where the policy holder makes one-time upfront payment for the desired duration, the company also offers no-claim bonus to customers even if they claim the insurance in 2 out of three years of the policy tenure. The third party insurance component of the policy remains the same for the policy duration.
India has over 160 million two wheelers. Last year alone 18.5 million two wheelers were produce in the country. Two wheelers involved in 26% of the total road accidents and 60-70% of the two-wheelers plying on Indian roads are uninsured, according to the company.
Responding to a question, Dasgupta said they would think of extending longer term policies to other vehicle segments and also consider increasing the policy duration depending on the claim experience and other factors. Two wheeler insurance contribute less than 10% of the close to Rs 7,000 crore business premium under written by the company last year. General insurance sector is witnessing higher growth compared to last year's level of around 10%, according to him.
6-7 companies sought increase in FDI
Meanwhile, IRDAI chief T S Vijayan said about 6-7 insurance companies have approached the regulator seeking permission to increase the FDI. Refusing to give the names of the companies, he said they wanted approval to raise the FDI ranging from 36 to 49%. The companies seeking increase in FDI come from both life and non-life, according to him. Life insurance business in the last six months is almost flat while non-life is growing especially on the back of health insurance segment, according to him.
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