Eighth International Conference on insurance "Indian Insurance Sector: Achievements and Prospects"
October 15 - 16, 2003, New Delhi

Welcome Address for Dr. A C Muthiah, President, FICCI

Mr D C Gupta, Finance Secretary
Mr C S Rao, Chairman, IRDA
Mr Sunil Mathur, Chairman of FICCI's Insurance and Pensions Committee of FICCI and Chairman, LIC
Mr Oscar Smith, Country Manager, RGA Reinsurance
Friends,

A very warm welcome to all of you.

I would like to thank Mr. D C Gupta, Finance Secretary, for sparing some of his valuable time to be with us and share his perspectives on this important segment of the economy. My special thanks to Mr C S Rao for agreeing to be with us both the days and not only share his vision as a regulator but also listen to all of us. Sir, we are indeed grateful to you for the support you and the authority has been providing to us.

Thank you Mr Mathur for your constant guidance and support in putting this event together in your capacity as the Chairman of FICCI's Insurance and pensions committee.My thanks to all the sponsors and supporting organisations for enabling us in making this event a success. The Indian insurance Sector has come of age. With the private sector companies having made a foray in to the market the scenario has started to change.

As expected, liberalization of this sector has helped bring about several positive developments.

• The market size has expanded,
• New products are entering the market,
• Innovative Channels of distribution are being used,

Customer servicing has improved tremendously
The Insurance Market is likely to grow at a rate of 22 - 27 per cent, giving enough room to all the players to grow. Of course ultimate success will be determined by the servicing and customer satisfaction.

However, consumer awareness level is still off the mark. According to the recently conducted FICCI survey on the Present State of Indian insurance industry, a copy of which is available with all of you, the awareness levels regarding Insurance are still in the realm of medium to low. This clearly indicates the onerous task that companies have in creating awareness about "need to Insure" and also tremendous potential they have in expanding the markets by getting more customers in their fold by increasing awareness levels.

Here I must congratulate IRDA for its consumer awareness campaign and am sure this will help spread the message of need to insure amongst masses.

Despite several positive developments and entry of several large private players in the market, there are certain areas, which need to be deliberated in order to reap full potential of privatization.

Although market share of private sector has increased to almost 10 per cent market size, moot question is have new markets been tapped? Here I would like to underscore the opportunities that exist in the rural market. FICCI's allied organization namely, FORTE, a joint venture between FICCI and ING insurance has done some interesting study on the potential for Insurance products in the market and of late is involved in doing a detailed study on developing distribution strategy in rural markets.

In fact, the companies should start looking at the B&C population segments, as the metro and large urban market will saturate in 3-5 years time. The success of the companies will be determined by the insurers ability to innovate and distribute simple products for B&C population segments.

The 26 per cent Foreign Equity in Insurance Joint ventures continues to be an issue of concern and needs to be reviewed. I am sure government in due course will certainly look at it. Also, in light of recent talk on benchmarking FDI limits for all sectors at 74 per cent, would this have any implication on Insurance sector as well?

The issue of rebating has been bothering the regulator as well as the players. This needs be looked at seriously to ensure regulated and sustained growth of the Insurance market.

Taxation issue on the life side continues to bother the Private Insurance companies.

Detariffication is another critical element of Insurance reforms. This sooner or later will become a reality, as tariff and liberalisation do not go hand in hand. Worldwide, markets have gradually moved to detariffication. It is therefore important to chalk out a roadmap, prepare all the stakeholders of its likely impact, and make the process less painful.

Health Insurance has a great potential in the country but remains highly underdeveloped in India. According to some estimates, only 3 per cent of India's population is covered under some form of voluntary health insurance schemes. This segment needs regulator's focused attention for its development. We will be happy to have Mr Rao's views on the same.

Another critical issue is Pension reforms. Government has undoubtedly done a lot of work. A beginning has been made, by announcing the setting up of PFDRA. However, there is some lack of clarity with the existing Insurance companies on their role in this new structure. Perhaps, Finance Secretary could throw some light on this aspect in his address.

These are some of the issues I wanted to share today.

I am sure that the deliberations over the next two days would help draw up a road map towards further strengthening the Indian Insurance Industry. May I now call upon Mr. Mathur, to make his theme Presentation.

Thank you