Finance Minister P Chidambaram Monday asked general insurance companies to come up with specific proposals so that the government could take measures to increase penetration of non-life insurance business which is at present estimated at less than one percent of GDP.
New Delhi: Finance Minister P Chidambaram Monday asked general insurance companies to come up with specific proposals so that the government could take measures to increase penetration of non-life insurance business which is at present estimated at less than one percent of GDP.
"We will get back to the Ministry within the week with specific proposals for boosting general insurance," said the head of a public sector insurance company after the meeting of industry representatives with the Finance Minister.
To increase penetration of general insurance, Chidambaram has asked CEOs of public and private sector companies to provide suggestions for removing impediments that hamper growth of the sector, said an official release.
The industry representatives during the meeting raised various issues with regards to taxation, loss-making motor insurance business and health insurance, the public sector insurance company official said.
He added the Minister wants them to come up with specific proposals.
Among other things, the industry representatives pitched for de-tariffing of motor insurance, development of pricing mechanism for health insurance business and lowering of the Minimum Alternate Tax (MAT) on the sector.
"Our (general insurance) penetration rate is low. It is 0.7 percent. How do we improve it to average standard which is 1.5 to 4 percent? The road map is to be prepared by all of us," Financial Services Secretary D K Mittal told reporters after the meeting.
The basic agenda of today's meeting was to work out ways to increase penetration of non-life insurance and promote financial inclusion, Mittal added.
Chidambaram had earlier in the month held similar exercise with representatives of the life insurance industry with a view to boosting the sector.
The major challenge before the industry, Chidambaram said in his remarks, was to increase reach to maximum number of people along with growth of investment in the sector.
Later, talking to reporters, Bharti AXA General Insurance CEO Amarnath Ananthanarayanan said there was a general feeling that a lot is needed to be done to promote non-life insurance sector in the country.
Among other things, he said, low profitability was also hampering growth of general insurance business in the country.
"...Things hindering the growth of insurance sector is lack of profitability among the general insurance companies," he said, adding the government would also need to pursue legislative changes which are awaiting Parliamentary approval.
The government's decision to raise foreign investment in insurance from 26 to 49 percent cannot be implemented without amendment to the Insurance Act. The amendment bill has been pending in Parliament since December 2008.
The general insurance industry is facing losses mainly due to high claims on third party motor insurance pool and high cost-to-claim ratio in the health insurance sector. The ratio was as high as 140 percent as on June 2012.
It was pointed out that motor vehicle insurance, which accounts for 41 percent share of non-life insurance business, faces major challenges because of regulated tariff, unlimited liability and non-jurisdiction restriction for filing claims.
The industry suggested de-tariffing of motor insurance and a cap on liabilities of insurers. Suggestions were also made for improving penetration of home insurance business.
Industry also requested for hike in service tax exemption limit and removal of TDS on payment of reinsurance premium by insurance companies.