Insurance industry needs capital of Rs 50,000 crore per year to double penetration in next 5 years: Irdai’s chief

The Insurance Regulatory Development of India’s (Irdai’s) chief Debasish Panda has said that the insurance industry will need a capital infusion of Rs 50,000 crore per year to double its penetration in the next five years. Panda appealed to business conglomerates to channelise funds into the sector, and said that the return on equity is at a healthy 14 percent for life insurers and 16 percent for non-life, while in the case of top five companies it goes up to 20 percent as well.

It can be noted that the insurance sector is a very competitive industry, with nearly two dozen life insurance companies and over 30 non-life ones. The overall penetration for insurance is 4.2 percent as of FY21-end. He said ‘If we have to double the penetration, every year there is a need to infuse an additional Rs 50,000 crore’. He said the number has been arrived at after doing an analysis of current GDP growth, inflation and penetration, and also added that he will meet the heads of insurers after March to prepare in pursuit of the same requirements. He added ‘I'd like to reach out to the conglomerates who are present in this country, individual investors who are interested to invest their money’.

Irdai’s chief said the target is to double penetration in the next five years, and added that it is possible to insure all by 2047, when the country will be celebrating its 100th anniversary of independence. Panda said India is at present the tenth biggest market in the world and will be the sixth biggest by 2032. He exhorted industry is content serving people with traditional or old products, but needs to analyse the newer needs of protection as well.

He asked the players to engage with housing regulators to try and make property insurance compulsory, or impress the need for property insurance with the Union housing ministry. Insurers also have to go beyond the present distribution arrangements with scheduled commercial banks, and have bancassurance arrangements with non-bank lenders, co-operative banks and also payment aggregators. Panda also asked the insurers to create grievance Redressal cells with a separate set of officials in place. There is also a need for financial sector participants to work together synergistically for deepening the penetration.