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IRDAI wants life insurance companies to see 50% premium growth in 5 years
16-Jul-22   09:11 Hrs IST

In a first-of-its-kind advisory, the Insurance Regulatory and Development Authority of India (IRDAI) has proposed five-year premium growth targets for life insurance companies in a bid to double insurance penetration in the country.

In an email communication to MDs and CEOs of life insurance companies, the insurance regulator has suggested a gross written premium (GWP) growth target for each insurer.

"IRDAI has given each life insurer indicative targets in terms of total GWP for the next five years," said Rushabh Gandhi, deputy CEO, IndiaFirst Life Insurance, told Business Standard. "It has also offered to discuss any regulatory support that the insurer may need to meet the target. Overall, this will help increase the insurance penetration in the country substantially."

While IRDAI has targeted 30 per cent compound annual growth rate (CAGR) in GWP over five years for large insurers, it has recommended 50 per cent CAGR for smaller companies.

GWP is the sum of new business premium and renewal premium. The regulator has identified a state for each insurer where it should take forward the drive for increased insurance penetration.

"IRDAI has sent separate e-mails to individual companies prescribing growth targets. All life insurance companies have been given targets. The regulator aims to grow insurance penetration in the country over the next five years. The insurance penetration as a percentage of GDP is low and the regulator wants to double it in the next five years. If every insurance company drives growth, the overall insurance penetration will certainly increase," said the CEO of a life insurance company.

According to IRDAI's annual report, the life insurance penetration in India is 3.20 per cent and the overall insurance penetration in the country is just 4.20 per cent. Insurance penetration is measured as a percentage of GDP. ôSince IRDAI has a developmental role, it is perfectly within its realms to prescribe targets to insurance companies,ö said an insurance industry veteran.

Although the regulator has set targets for individual life insurance companies, it is not clear whether insurers will face any action for failing to meet such targets.

"There is no clarity on what the repercussions would be if companies failed to achieve the target. It's a five-year plan and it's not that the regulator will not be asking us to show our progress every two months. As of now, the regulator has not said that part of the remuneration of the MD/CEO shall be linked to such targets," said the person quoted above.

In the past few months, since Debashish Panda took over as chairman of IRDAI, the regulator has brought in several changes in regulations that will make it easier for insurance companies to develop innovative products and bring them to market.
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