Revival plan for non-life biz?

MUMBAI: A revival package is on the anvil for non-life insurance companies on the lines of what was announced by the finance minister for the life insurance industry earlier this month. Finance minister P Chidambaram on Monday met chiefs of non-life companies to decide on measures required to increase general insurance penetration, which has stagnated at around 0.7% of gross domestic product.
"There was a suggestion that tax breaks under section 80D could be extended to property insurance for premiums up to Rs 1 lakh," said Amarnath Ananthanarayanan, MD & CEO, Bharti Axa General Insurance. At present, the only tax break for non-life is on payments up to Rs 20,000 for health insurance. "We also discussed in motor insurance third party pricing and of the large number of uninsured vehicles in India, estimated at around 9 crore," said K G Krishnamoorthy Rao, MD & CEO, Future Generali India Insurance. Among the other suggestions was that authorities should mandate property insurance for multi-storeyed housing as is the practice in some countries.
Some insiders say that the industry has not been able to realize its potential because of unhealthy competition for top line. This is partly driven by the four state-owned insurance companies. According to K K Srinivasan, former member of IRDA, there is a strong case for merger of the four non-life companies.
"The four PSUs were created in the early seventies when the industry was nationalized. The purpose was to create a modicum of competition. It has lost its relevance now with around 20 private sector non-life insurers in the field. It is senseless to keep the four PSUs competing among themselves. It is high time the sector is reformed by merging the four PSUs into one and give a strong united competition to the private sector," said Srinivasan.
Some of the regulatory issues were similar to the ones raised by the life insurance industry. Non-life companies wanted regulations that would permit them to come up with products that could be sold after being filed with the regulator. They also wanted liberalization of distribution norms so that policies could be sold through banks.
The finance minister had earlier announced measures that would address these issues for the life industry.
In the meeting, the finance minister took down the views of all companies and indicated that the government would take measures to improve growth in the non-life sector. State-owned non-life companies highlighted their peculiar problem of not being able to hire actuaries in light of the age restriction which bars those above 70 years from being appointed.