1273578–Moushmi kumari – F1 - Q48-The alignment of economic incentives with distribution dynamics should be driven by market forces rather than regulatory intervention. Comment

Q.1  <1273578–Moushmi kumari – F1 – Shubhra sharma – MB F2>.  http://youtu.be/iggQWDIqOrQ

Q.2  <1273578 Moushmi kumari, F1, Q 48 – The alignment of economic incentives with distribution dynamics should be driven by market forces rather than regulatory intervention. Comment>

Introduction:-

The Indian insurance industry seems to be in a state of flux. After a decade of strong growth, the Indian insurance industry is currently facing severe headwinds owing to:

• Slowing growth
• Rising costs
• Deteriorating distribution structure
• Stalled reforms

In the long run the insurance industry is still poised for a strong growth as the domestic economy is expected to grow steadily. This will lead to rise in per capita and disposable income, while savings are expected to be stable.

The demand for insurance products is likely to increase due to the exponential growth of household savings, purchasing power, the middle class and the country’s working population growing of the financial industry as a whole.

• Growth of life and non-life industry
• Promoting innovation and removing inefficiency
• Competition and orderly growth
• Growth of specific insurance segments such as motor insurance.

Discussion:-

Emerging trends

• Multi-distribution
• Product innovation
• Claims management Profitable growth Regulatory

Life insurance: challenges

• Products strategy and design
• Cost
• Taxation
• Distribution
• Prospects and challenges of various channels
• Compensation
• Customer service
• Governance and regulatory issues

Non-life insurance: factors impacting growth

• Product pricing, innovation and simplicity
• Distribution
• Compensation
• Micro-insurance in non-life widening reach
• Governance and regulatory changes
• Health insurance
• Innovative products to counter the competition
• Improved fraud control mechanisms
• Standardization to reduce claims loss
• Reducing inefficiencies by revisiting third party administrator (TPA) agreements

The Indian insurance market is poised for strong growth in the long run. It stands at the threshold of moving towards a stable position, delivering “stable profitable growth.”

Significant latent market - The insurance market has a considerable amount of latent potential, given the fact that the Indian economy is expected to do well in the coming decades leading to increase in per capita incomes and awareness.

Channelizing industry focus - In meeting the significant potential, the industry has an increased role and responsibility. Three areas of focus could be — a) product innovation matching the risk profile of the policy holders b) reengineering the distribution and more significantly c) making sales and marketing more responsible and answerable.

Distribution - Distribution channels evolved in response to market dynamics and changing consumer preferences. The alignment of economic incentives with distribution dynamics should be driven by market forces rather than regulatory intervention.

Regulation - The industry should be given time to adjust to regulatory changes in a phased manner aligned with a regulatory impact assessment. Regulations need to drive transparency and simplification of products and services.

Conclusion:-

In my opinion IRDA always take the suggestion from the market and take instructions from market because the market is dynamic, its change fast, the rules and regulation always changes and the government policy always changes. The stakeholders should eventually work toward maintaining a favorable environment for stable growth, increasing the penetration of insurance to rural and underpenetrated areas and increasing the contribution to the economy.  So, the alignment of economic incentives with distribution dynamics should be driven by market forces rather than regulatory intervention.