When the insurance regulator regulates the industry, GI Council creates a desirable platform for the general insurers to broad-base their business with necessary feedback and data supports.
The General Insurance Council (GI Council) has a legacy of more than six decades, passing through phases of evolution that has taken place in India’s general insurance industry over the years. It traces its root in the era of Insurance Association that existed in the early 50s before the nationalization of non-life insurance companies. The Indian general insurance business was nationalized in 1972 bringing the then existing 55 insurance companies and more or less the same number of general insurance operations of other companies under the government control. The reason behind the nationalization was obviously to ensure accountability, safety of the policy holders’ interest and restraining the insurers with regard to the handling of policy holders’ money. Nevertheless, there hadn’t been a regulator that could regulate the modus operandi of the insurers in those days. Insurers were self-regulated, though the market enigmatic.
The nationalization led to the formation of General Insurance Corporation of India (GIC of India) to bring all operations under one umbrella as the government transferred all the assets and operations of the newly nationalized general insurance companies to it. Once the mergers were over, GIC was reformed to be a holding company of four general insurance companies – the New India Assurance Company Ltd, National Insurance Company Ltd, Oriental Insurance Company Ltd and United Indian Insurance Company Ltd. Until the year, 2000 these four companies enjoyed monopoly and months after the sector was opened for private entry, GIC of India was made India’s reinsurer. The insurers used to observe what might be called self-regulation, being government controlled institutions. Yet, there was a huge space for setting an operational standard for general insurers, information flow on market behavior, knowledge and data sharing and other challenges on the market front
In fact, that paradigm shift wasn’t enough to meet the challenges of the general insurance sector. The insurers have their own limitations as commercial institutions. The insurance industry required a platform for sharing data and other information for their healthy functioning, commonly acquiring knowledge of the customer behavior and exchange information so that fraud, duplicity and misuse of cover are plugged up. It was there GI Council had to play its role with an exclusive focus on the general insurance business. When the sector was opened for private entry the regulator’s challenge became heavier.
The insurance industry was privatized in India in the year 2001 and the government set up a regulator, Insurance Regulatory and Development Authority of India, widely known as IRDA in that year. That followed entries of many private insurers virtually flooding the market, simultaneously increasing the possibilities of duplicity and operational risk of insurers. Insurers, while focusing on their business cannot look at educating the public, building a national data bank of insured ones and strike a deal among all players to exchange information. This can only be done by a Council, while regulator is engaged in industry regulation and operational standard. IRDA, as a regulator, is vested with a role to regulate, promote and ensure orderly growth of the insurance and re-insurance business in India.
In a business that involves citizens’ hard-earned money and promise of cover by private underwriters there was a need of commonly acceptable and accountable regulatory body to ensure the best industry practice, set a moral operational standard and accountability. On the other side, awareness among people about the importance of buying insurance cover and also the importance of ethical behivour are necessary for the growth of the industry. This is possible only through penetration of insurance buying habit, says Mr R Chandrasekaran, Secretary General of GI Council. That was the role GI Council is vested with and has been doing over the years, since much before the reconstitution. The GI Council in its new form was set up under section 64C of the Insurance Act, 1938 since 2001 by IRDAI with formal structure and responsibilities, considering the nature of the industry and growing necessities. It had its presence and played a big role in disciplining the non-life market by setting a desirable structure for insurers and insured ones before the regulatory authority came into existence for regulating the insurers. GI Council now plays its roles for promoting a better understanding of non-life insurance amongst the masses and provides necessary inputs to the media about the developments in the non-life insurance industry. It also works for building reliability of the industry that brings confidence among the policyholders.
India is a huge market for insurance, both life and non-life. General insurance has much bigger space for growth than life insurance. Compared with the world average ratio of general and life insurance, the non-life weighs just around a quarter of life insurance, while the global average of general insurance is three times the size of life insurance. The reasons obviously are the low penetration, poor awareness and little compulsion on people to buy insurance products for coverage of specific risks, points out Mr Chandrasekaran. It is often seen, even those mandatory insurance like motor policies are not bought by every vehicle owner, especially in semi-urban and rural areas.
In India people do not consider insurance as a priority instrument, even if they can afford to buy it for covering their unforeseen risks. They buy it mostly under compulsion. Even those compulsory cases like motor insurance, many vehicle owners still willfully evade insurance. People buy home insurance only if the mortgage lender insists, but the renewal rate is too low. In those cases where claims are not made for some years, the buyers begin to neglect renewal. “We need to look at these areas and make the people understand the fact that insurance is not for making claims alone but as a cover against unforeseen misfortunes and saver from unpredictable perils, says Chandrasekaran. No one can predict when will one’s risk emerge.
For growth in industry like insurance, what is important is creation of awareness, he points out. Insurance companies are expected to talk only about their specific products. Selling their products is their aim. But one has to create an enlightened market for easy selling of their products, since buying insurance is yet to be considered as important as paying for their utility bills. It can work if people are enlightened about it, he adds. “GI Council finds it important to create awareness about insurance buying among the people. It has started growing now, thanks to the popular government schemes,” he avers.
One of the major challenges that the general insurance industry faces is the fraud. So buyers also have to be self-disciplined and matured. Often there are fraudulent claims, which are criminal in nature. “We are aware of this challenge and taking all necessary measures to prevent this public misuse,” he points out and adds: With close studies on already reported frauds and special training for investigation on claims, we hope to bring such incidents under control”.
Competition usually leads to achieve better product innovation and improving delivery efficiency and service standard. But that should not be a spoiler. For healthy existence of the industry and to instill confidence among insurance buyers, there should be some codes of conduct for member companies.
Secretary General, General Insurance Council
Insurers focus on selling their products through various channels including e-platform, bancassurance and the conventional advisors’ network. Regulators regulate the market. Council creates an atmosphere for insurers to function smoothly in the market through providing data support and other facilities.
There is a huge scope for expanding the insurance base, which the industry stakeholders can tap if their mind is focused. The two major government schemes Pradhan Mantri Suraksha Bima Yojana, and Ayushman Bharat-National Health Protection Scheme could boost the insurance penetration.
Pradhan Mantri Suraksha Bima Yojana
Pradhan Mantri Suraksha Bima Yojana (PMSBY) was launched on 9th May, 2015 with a view to enhance the level of insurance penetration in the country and to provide insurance cover to common people especially poor and the Under-privileged Sections of the society. The enrolments under PMSBY have gradually increased since its launch. As on 31st July 2018, 13.74 crore people have been covered under PMSBY across the country. The government has taken various steps to broaden awareness among people for taking home the benefit of the scheme. The public sector general insurance companies and banks had coordinated with State governments and put up camps at 50 locations across the country for publicizing and increasing enrollments under PMSBY during the Mudra Campaign in October last year.
Year Total enrolments
Ayushman Bharat-National Health Protection Scheme
On 23rd September, the Prime Minister launched Ayushman Bharat-National Health Protection Scheme with a vision to provide the poorest of the poor, and the underprivileged sections of society, with better healthcare and treatment. The scheme envisions health assurance of Rs 5 lakh per family a year and will benefit 500 million people, making itself the world’s biggest health assurance scheme. In fact, As many as 8.03 crore families in rural and 2.33 crore in urban areas as per the Socio-Economic Caste Census (SECC) 2011 data are be entitled to be covered under these scheme. The scheme will subsume the erstwhile Rashtriya Swasthy Bima Yojana (RSBY) launched in 2008.
The insured amount would cover all investigations, medicine, pre-hospitalization expenses etc. The number of beneficiaries of this scheme is roughly equal to the population of the European Union, or the population of America, Canada and Mexico, put together.
The scheme would cover 1300 illnesses, including serious illnesses such as cancer and heart disease as well as pre-existing illnesses from the first day of the policy. Private hospitals too would be part of this scheme. More than 13,000 hospitals across the country have already joined the scheme. A defined transport allowance per hospitalisation will also be paid to the beneficiary. The benefits of the scheme are portable across the country and a beneficiary covered under the Mission will be allowed to take cashless benefits from any enlisted public and private empanelled hospitals across the country.
Every empanelled hospital will have an Ayushman Mitra to assist patients and will coordinate with beneficiaries and the hospital. They will have a help desk, check documents to verify the eligibility of the patient.
Rural area category
- Families having only one room with kucha walls and kucha roof
- Families having no adult member between the ages of 16 years and 59 years
- Female-headed households with no adult male member between the ages of 16 years and 59 years
- Disabled members and no able-bodied adult member in the family
- SC/ST households
- Landless households deriving major part of their income from manual casual labour
- households without shelter
- living on alms
- manual scavenger families
- primitive tribal groups
- legally released bonded labour
- Domestic workers
- Street vendors/cobblers/hawkers/other service providers working on the streets
- Construction workers, plumbers, masons, labor, painters, welders, security guards, coolies, head-load workers;
- Sweepers, sanitation workers, malis;
- Home-based workers, artisans, handicrafts workers, tailors
- Transport workers, drivers, conductors/helpers to drivers and conductors, cart pullers, rickshaw pullers
- Shop workers, assistants, peons in small establishments, helpers, delivery assistants, attendants, waiters; electricians, mechanics, assemblers, repair workers
- Washer-men, chowkidars
- Non-workers depended on Pension, Rent, interest income, etc