Mumbai: Even as the insurance sector has witnessed a decline due to regulatory changes, industry leaders are optimistic about scope for growth.
The picture is not all gloomy, and though in the short run the industry may be undergoing a catharsis, the long-term picture is still compelling, and a stronger and better-founded insurance industry is likely to emerge from this challenging situation, a joint study by CII and leading global professional services organisations says.
Innovation is the first casualty in tightly controlled markets, leading to drying up of incentives for product manufacturers and decline in business activities, the report pointed out.
The report also said the market today is primarily dependent on push, tax incentives and mandatory buying.
"There is very little customer pull, which will come from increasing financial awareness along with increasing savings and disposable incomes. Till then the stakeholders will have to strive for product simplification, transparency of cost and pricing, effective distribution and improving customer servicing to drive sales," it said.
In the long run, it said, the insurance industry is poised for a strong growth, as the domestic economy is expected to grow steadily.
For the first time in 12 years, the life insurance industry witnessed a decline in the first year premium collected in FY12, from Rs 1,258 billion in FY11 to Rs 1,142 billion, a drop of approximately 10 percent.
The business model for insurers has been changing for the past couple of years on account of regulatory changes.
"While the regulatory changes were aimed at customer protection and increasing transparency in pricing and operations, it gave the industry very little time to adjust, leading to a lot of uncertainty in the market environment," the report said.
The industry is also likely to witness consolidation as and when the regulator finalises the guidelines for mergers and acquisitions, the report forecasted.