Insurance industry in 2014

With ex CMD of LIC joining as the IRDA chief and with greater focus on financial inclusion and innovations, this year promises to be quite interesting for insurance industry. Here is a roundup of actions expected in the insurance industry in 2014.

1. IRDA has been nudging distribution models towards open architecture. There is a proposal for banks to act as brokers instead of agents. There is also a proposal being explored of introducing an intermediary, called Insurance Marketing Firm (IMF), An IMF would sell not only the policies of multiple insurers but also mutual funds and other financial services. This is expected to give an even playing field to insurers in leveraging the bancassurance models.

2. Post Dec 23013 there have been a flurry of new products and more are expected in the pipeline. The online models have also matured with more and more product being offered online mode as well. 2014 is expected to see increased focus on innovation in products and distribution.

3. Industry expects increased leveraging of technologies to deliver better customer experience and cut costs. IRDA’s action on e-repositories has been much awaited and have put insurance policies on par with other dematerialized financial services. More focus on mobile technologies and greater use of cloud based technology are expected to increase penetration.

4. While the bill on increased FDI limits is not expected to be passed any time sooner the mergers and acquisition activities in insurance sector has picked up and several foreign JV partners reported to be looking for buyers. However the low insurance penetration of 4% should bring in fresh capital.

5. More focus on regulatory monitoring and actions. Recently IRDA directed LIC, Birla Sun Life Insurance and ICICI Prudential to improve their AML processes. In 2013 IRDA slapped a fine of nearly Rs. 5 crore on 12 insurance companies, including market leaders HDFC Life and ICICI Prudential Life for non-compliance with various regulatory stipulation.

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