FINCON 2023

Attended #FINCON2023 organized by #ficci at Mumbai today. A few observations and personal viewpoints:

Chairman, #irdai, Shri. Debasish Panda pointed out that, he had provided the insurance industry with all that they had sought, e.g. single limit on EoM, simpler regulations, easier compliance, simpler investment norms and so on. In short, 'a smooth highway' had been laid out and now the industry had to gear up to meet the vision of 'Insurance for All by 2047'. He cautioned that this was not a mere slogan but had to be made into an operational plan involving various arms and agencies of the government.

#bcg MD, Alpesh Shah made a crisp presentation on how external engagement was critical for meeting the three objectives of ' Awareness, Accessibility & Affordability', aimed at the customer. He added a caveat that this was the view of an independent observer, and it was up to the industry on how it goes about meeting these objectives.

Here lies the problem. One of the panelists, while extolling the virtues of ' open architecture', where a bank could tie up with 9 insurers each in life, non-life and Health, said that banks would NOT choose between the insurers, but choose the best product available for their customers. Whether he thought the audience was naive, or he was, is not clear. It is no rocket-science that banks would gravitate towards the insurers who pay them more remuneration. Will banks provide a comparison of the products of different insurers to their customers and give them choice? The same speaker mentioned rightly that insurance will continue to be a 'push' product. So true, and banks are capable of giving a hard push. So does the customer gain by way of lower premium? No. Bancassurance model is the costliest form of distribution. Insurers do argue that loss ratios from Banca sourced business is low. Fine, in which case, the benefit of lower price should percolate to the customer, instead of a higher remuneration to the banks.

Other speakers lauded the initiative of Bima Vistaar -- Simple, standard products at affordable prices and easy to be sold by newer channels, such as self-help groups. Conceptually, it is brilliant, but in practice, Bima Vistaar may go contrary to the vision of 'inclusive insurance coverage' i.e. insurance for all. If data analytics reveal that the product is churning out adverse loss ratios in some quarters, insurers may decide not to offer this product to those sections/region/groups, etc. Does this not go against 'inclusive insurance'? Do not blame the insurers though, they are answerable to their shareholders for bottom-line too. One option could be to make sale of Bima Vistaar products compulsory for all insurers, either on the basis of number of policies or value of premium, in proportion to the overall GDPI of each insurer. Well, that would come in the way of a free market, will it not? Possibly it is for the regulator to ponder upon.

So, the challenge faced today by the insurers is how to balance out their societal obligations with the bottom-line obligations to their shareholders, something the industry is not openly talking about.