"I am pleased to participate in this valedictory session of the 4th South Asian Insurance Regulatory Meet and International Insurance Conference.
I am told that the Insurance Regulators of South Asian countries have been meeting since 2013 to exchange views and learn from each other’s experience. This platform, no doubt, has become an important forum to better understand the regulatory frameworks, market infrastructure and forge greater cooperation in areas of common interest.
I am sure the participants at this meeting have shared and discussed various best practices of the regulators and measures needed to develop a stable and inclusive financial sector across the entire region of South Asia through collaboration.
Insurance, over the last five hundred years, has emerged as an effective risk management strategy that protects individuals and institutions from financial losses arising out of unforeseen contingencies.
Funds pooled from many entities subscribing to the insurance programme are utilized to pay for the losses that some subscribers may incur.
Since there are many uncertainties and unforeseen catastrophic events in life like heavy crop losses, health emergencies and financial downturn, insurance has become a useful mechanism for coping with the losses and cushioning the impact.
It has emerged as an important financial service and enterprise.
As the volumes of subscribers grow and the insurance grows into an industry, the need for a regulation arises. There is a need to prevent fraud and moral hazard. There is a need to protect the interests of the subscribers who are paying the premium. In a way, the regulator ensures that system is fair, transparent and accountable.
In the wake of globalization, there are new and emerging challenges and unprecedented uncertainties.
Today, there is a greater need for insurance regulators. There is also a need for regulators to connect and collaborate because we are living in an increasingly interconnected and interdependent globe.
It is therefore a welcome move to have a dialogue like this among the regulators in the South Asian region to collaborate to share knowledge and good practices. The insurance companies as well as the regulators need to evolve with changing times. The focus, however, must be on curbing unfair trade practices and ensuring availability of policies and products to the common man at affordable prices.
Although the SAARC countries are different in size, population and in terms of economies, these nations have many things in common with similar problems and needs. Ageing population, frequent occurrence of natural calamities and lack of uniform medical care are some of the similar challenges faced by the SAARC countries. Equally important is the need for greater insurance penetration as only a miniscule percentage of the population has access to insurance.
I am sure the participants and other experts, who gathered here, must have discussed various aspects of the regulatory environment as also the need to improve insurance outreach in the South Asian countries.
With global warming and climate change rendering agriculture highly unpredictable and greatly increasing the vulnerabilities of the vast populations dependent on farming, the safety net provided to them through insurance must indeed be comprehensive and wide-ranging.
In view of frequent natural calamities such as cyclones, unseasonal heavy rains and droughts, disaster and catastrophe insurance must top the agenda of insurance companies and regulators. I am happy to note that crop insurance schemes for farmers, who are aided by technology has been one of the topics of discussion.
Sisters and Brothers!
Cyber security and cyber liability insurance have become extremely vital in the present times with cyber criminals increasingly hacking and stealing valuable and sensitive data—be it of organizations or individuals.
Some estimates have put the global average cost of data breach in 2017 at $3.2 million and the average cost of each breached record is believed to be $ 141 for companies. Apparently, the challenges in cyber risk management will be quite different for insurers from those of normal businesses. It should be borne in mind by the insurance companies that data breaches can make small businesses go out of business.
Ensuring access to healthcare through insurance is another important area that must be the focus of insurance companies as well regulators. The thrust must not only be on penetration to cover all the vulnerable and marginalized sections, but also on ensuring access to quality healthcare and protecting the interests of policy holders.
Registering an average growth of 7.5% during the last three years, Indian economy is now 2.5 trillion dollar economy, the seventh largest in the world. On purchasing power parity basis, it is the world’s third largest economy today.
I am glad that India is taking concerted actions to make it easier to do business and has moved from 130th position last year to 100th position in 2018.
The World Bank’s report 2017 had acknowledged that the fundamentals of the Indian economy remain strong with robust economic growth strong fiscal consolidation and low current account deficit, higher agricultural output, growing FDI low inflation and higher wages in rural areas.
The country is also focusing on a number of social protection measures including guaranteeing rural employment, universal health insurance and strategies to promote inclusive growth.
With the India’s GDP growth averaging close to 7% in the last decade and in excess of an average of 7.1% in the last three years, the strong economic growth has lead to an almost three fold increase in disposable income levels in the country
As against the global average of 6.2% the penetration rate of Indian Insurance Sector in 3.39% there is huge potential for growth and the future looks bright due to growing middle class. Rise in disposable incomes and greater awareness for insurance coverage the rise in disposable incomes has correspondingly been associated with a growth in overall household savings, and this has resulted in an increasing demand for financial products and risk management solutions such as insurance.
As per moody’s investor’s service the latest regulatory reforms in India have improved the ability of Indian primary insurers to take advantage of the countries strong economic growth.
As per their report, published in November 2017,
Regulations introduced since 2015 have facilitated the access of the insurers to capital and re-insurance cover, while encouraging them to improve the quality of their investment assets and reserve adequacy.
These developments will gradually allow Indian insurers to reap greater benefits from India’s strong economic expansion and to increase take up of Insurance from current low levels.
Of course the increase in coverage can happen only when insurers come out with products which are relevant to the middle and lower income groups. For this to happen, the products have to be low cost and simple enough to be understood by large segments of population and easily available across the country.
I am glad to note that Insurance sector in India has contributed immensely to the economic development of the country. The investments made by the insurance companies amounted to Rs.30, 76,537 crore by the end of 2016-17 of which over Rs.2,40,000 crore was in infrastructure. The insurance companies have also made significant investments in long-term developmental projects and have thereby effectively contributed to the nation-building process.
It should be noted that the insurance industry recorded a significant growth in the past few decades. It is expected to grow to US$ 280 billion by 2020 as the country is poised for higher economic growth. The insurance market increased from US$ 23 billion in 2005 to US$ 84.72 billion in financial year 2017. Increase in FDI and the government’s schemes to provide insurance cover to people, including those to farmers, have spurred the industry by increasing insurance penetration in the country.
I am hopeful that, the recently announced national Health Protection Scheme to provide coverage to 10 crore families, Pradhan Mantri Jeevan Jyoti Bima Yojana and Pradhan Mantri Surkasha Bima Yojana will give further momentum to expansion of the insurance industry as well mitigate a major financial risk for many poor families. In addition, many State Governments have also sponsored several other insurance schemes which provide coverage to different sections of population.
I am happy to note that the Insurance Regulatory and Development Authority of India (IRDA) is playing a critical role in the orderly growth of the insurance industry by developing guidelines for insurance companies. The market has to be well-regulated for sustainable growth and I am sure that IRDA will be taking all the needed measures to ensure it.
I am extremely pleased to dedicate this new state-of-the-art green IRDA building to the nation, which was constructed at an estimated cost of Rs.165.73 crore.
I am sure the recommendations of this two-day conference will help the authorities to further improve the regulatory frameworks in South Asian countries making them more agile, transparent and inclusive and encourage the insurance companies to come out with low cost, easily accessible products that meet the felt needs of the population.