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Strong distribution network key to boost insurance sector growth: CII-EY

Insurers should embrace the digital space with a resilient cyber security framework to disrupt the traditional business structures, it said, adding that cyber-security is a key risk area for insurance.

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Strengthening distribution network and exercising caution in identifying ways to employ capital inflows from foreign partners are key to boost growth of the industry, says a Confederation of Indian Industry-Ernst&Young (CII-EY) report on the country's insurance sector.

Insurers should embrace the digital space with a resilient cyber security framework to disrupt the traditional business structures, it said, adding that cyber-security is a key risk area for insurance.

Companies maintain information systems for core processes such as sales management system, policy administration system and claims management system, and as a result these are one of the prime targets for cyber-attacks.

To improve information security, insurance companies need to develop a strong risk management and governance framework by implementing enterprise-wide security programmes that address processes and controls, privacy and data protection.

"With the passage of the Insurance Laws (Amendment) Act 2015, the longtime demand of having greater access to foreign capital has been fulfilled. This one amendment can be a game changer as it will bring in significant fresh capital to re-energise the sector."

"However, insurance companies must tread with caution and carefully adopt changes to make the best possible use of the opportunities presented," the report pointed out.

It highlighted that skill development at an industry level and better service integration between the insurer and distributors will help in distribution efficiency.

"The Indian insurance sector has evolved and is looking at the future with renewed optimism. In order to realise the full potential, the industry must focus on aspects that will build value for all stakeholders customers, distributors, shareholders and the insurers," said Rohan Sachdev, Global Insurance Emerging Markets Leader and Partner, EY India.

"A step-by-step approach must be adopted to build value for customers, the primary stakeholders. Technology and analytics help to understand exactly what customers want, thereby creating long-term value for customers and earning their loyalty," he added.

According to the report, major gaps which the insurance industry must plug in are around realising a cost-effective distribution mix (primarily life), checking the ongoing slowdown in the non-life sector, getting a handle on claims (particularly in motor and health lines) and absence of a sizeable presence in the pension space.

Some of the focus areas identified in the report include chasing efficiency in distribution by finding synergy among channels, driving skill development at an industry level, optimising the distribution network and achieving greater service integration between the insurer and the distributor.

The report stresses upon making the most of the Insurance Laws (Amendment) Act 2015 by effectively utilising the incremental capital infusion to drive awareness, reaching out to under-penetrated segments and adopting global best practices in operational efficiency and service delivery.

It also advocates exploring possibilities in the pension space by developing relevant products and incentivising stakeholders, along with penetrating the health insurance segment by engaging customers early, creating cost effective offerings and by keeping a tab on frauds. 

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