Insurance Sector Needs Rs 50,000 Crore Capital Per Year For Growth: Regulator


The overall insurance penetration rate is 4.2 percent as of the end of FY21. (Representation)


The insurance industry will need a capital injection of Rs 50,000 crore a year to double its penetration rate over the next five years, industry watchdog Irdai’s chief Debasish Panda said on Friday.

Debasish Panda called on corporate conglomerates to channel money into the sector, saying return on equity is a healthy 14 percent for life and 16 percent for non-life, while in the case of top five companies it could be as high as 20 percent. rises. percent too.

It can be noted that the insurance industry is a highly competitive industry, with nearly two dozen life insurance companies and more than 30 non-life insurance companies. The overall insurance penetration rate is 4.2 percent as of the end of FY21.

“If we are to double penetration, it would be necessary to inject an additional Rs 50,000 crore every year,” Panda said at the annual insurance and pensions summit hosted here by industry lobby CII.

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He said the number came after an analysis of current GDP growth, inflation and penetration, adding that he will meet with insurer heads after March to prepare to pursue the same requirements.

“I’d like to reach out to the conglomerates that are present in this country, individual investors interested in investing their money,” he said.

The head of India’s Insurance Regulatory and Development Authority said the aim is to double penetration in the next five years, adding that it is possible to insure everything by 2047 when the country celebrates its 100th anniversary of independence celebrates.

India is currently the tenth largest market in the world and will be the sixth largest by 2032, Panda said.

The industry is content serving people with traditional or old products, but it also needs to analyze newer protection needs, he urged.

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He asked the players to contact housing regulators to try to mandate property insurance, or to bring the need for property insurance to the attention of the Union Department of Housing.

Insurers will also need to go beyond current distribution agreements with mainstream commercial banks and enter bancassurance agreements with non-bank lenders, cooperative banks and also payment aggregators.

“We need to rethink the way insurance is distributed,” Panda said, urging the industry to make the pie bigger rather than companies “fleeing” the competition.

Panda also asked the insurers to create complaints recovery cells with a separate set of officials.

There is also a need for financial industry participants to work synergistically to deepen penetration.

Manoj Anand, a full-time member of the Pension Funds Regulatory and Development Authority, said at the same event that there is a need for insurers to develop annuity plans that protect an individual from inflation risks.

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He said the PFRDA expects Rs 11,000 crore to flow into annuity plans offered by insurers in the next five years after a holder reaches retirement age.

At a time when a debate is raging over states switching to the old pension scheme, Anand said the new pension scheme has been very beneficial to the industry.

Total assets under the NPS stood at Rs 8.53 lakh crore as of December 31, 2022 and are expected to grow to Rs 9.25 lakh crore by the end of FY23, he said.

There is also a need for gig workers under company pension schemes, Anand said.

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