FM asks insurers to reorganise branches, open offices in towns
Concerned over rising losses of the public sector insurance companies, the Government Wednesday asked them to reorganise their branch network and open offices in smaller towns by month end to serve customers.
New Delhi: Concerned over rising losses of the public sector insurance companies, the Government Wednesday asked them to reorganise their branch network and open offices in smaller towns by month end to serve customers.
The reorganisation of branches, Finance Minister Pranab Mukherjee said, would help in increasing insurance penetration in unserved areas.
"A reorganisation of the existing loss making branches, especially those of non-life general insurance companies and also de-congestion of branches which are concentrated in metros can help this expansion in un-served areas," he said while addressing the CEOs of the PSU insurance companies.
Later talking to reporters, Financial Services Secretary D K Mittal said that LIC and general insurance companies have been asked to open offices in Tier-IV towns by June 30.
"Finance Minister was concerned about how to manage losses," Mittal said, adding that the government has asked insurers to move to e-governance to enhance profitability.
The state-owned insurance companies, according to Mukherjee, should focus on customers in smaller cities with high per capita income.
"...The per capita income has grown over the years and a large number of people in smaller towns are saving and are looking for insurance products. It is in this regard that we have decided that LIC as well as PSU general insurance companies shall necessarily have a presence in all the towns up to Tier IV classification as per census", Mukherjee said.
The non-life insurance companies made a loss of Rs 6,500 crore in 2011-12, of which motor insurance segment accounted for 50 percent. Besides, GIC made a loss of Rs 2,000 crore.
"Non-life insurance companies must see that they maintain profitability along with the growth. It should not happen that they are growing and making losses," Mittal added.
Mukherjee further asked insurers to restrain from unhealthy competition to ensure sustained business growth.
"It is well understood that growth in top line cannot be at the cost of bottom line. The Ministry has suggested certain welcome steps to curb the unhealthy competition in underwriting premiums and it will help restore the sustained business growth," he added.
Mukherjee said the insurers should appoint business correspondents as agents to increase coverage in rural areas.
Besides, Life Insurance Corporation (LIC) Chairman D K Mehrotra said the hour-long meeting reviewed the performance of the insurance sector.
"LIC has been doing well. Certain suggestions came up for non-life segment and the message came that how to move forward. It is more about giving better servicing to policy holder and better penetration," Mehrotra added.
Mukherjee further said that insurance companies should focus on other mode of distribution such as bancassurance. "Out of the available 80,000 bank branches, less than 7000 are being used by PSU insurers and we need to scale up Bancassurance immediately," he added.
Mukherjee said that natural calamities and catastrophic events in Japan, Thailand and elsewhere during 2011-12 have affected Indian insurance companies.
"I would advise LIC to work out "Kisaan Bima Yojana", a life insurance scheme for the farmers on the lines of JBY where the coverage can be extended up-to the age of 65 or 70 years and the additional premium could be borne by the farmers covered under the scheme," he said.
He said insurers invest massively in infrastructure projects and the total investments of the PSU insurance companies in infrastructure (as on March, 2012) was to the tune of Rs 14.26 lakh crore.
"While the loss of Rs 2,490 crore during 2011-12 is largely attributable to the natural catastrophes in Japan and Thailand and also due to the provisioning on account of motor pool, diversification of risk," Mukherjee added.