Insurance sector may shrink 10%

MUMBAI: The leading lady of the country’s largest private sector life insurance company, Shikha Sharma, was quick to admit that growth has 

significantly moderated in the insurance sector. “A slowdown was anticipated after years of hyper growth in the sector,” said the managing director & CEO of ICICI Prudential Life Insurance. 

In fact, the insurance sector will show a dip of 10% this year compared with an annual growth of 35% for the past seven consecutive years, she said. 

But Ms Sharma preferred to look at the upside of the downturn. “Hyper growth leads to inefficiency, and an environment with high growth means attrition goes up and you have to spend time and money retaining people,” she explained. 

So, at ICICI Prudential Life, the task for the next 18 months is clear. 

“Now is the time to remove waste, make organisational moves to bring in more efficiency and re-strengthen the company,” she said, adding, “it is a war on the waste.” 

But the only way forward is to have the right mix of clear strategy and good people. “One should believe there’s going to be a market 18 months down the line and work towards it.” 

ICICI Pru is planning to increase its investments this year — that’s our mantra for winning in a downturn, said Ms Sharma. “One needs to stay invested in people and this is the right time to accelerate investments, especially in rural areas and health insurance,” she added. 

But as far as financing is concerned, the situation has changed. “Liquidity has dried up post-October, and in spite of interest rates being cut, people are still waiting and watching,” said Ms Sharma. “Only when they get comfortable with the liquidity situation will they become comfortable with locking in money for long-term savings,” she explained. 

For the moment though, people are making fewer long-term investment commitments. “But when interest rates come down, banks will have to do some serious credit lending,” said Ms Sharma. Domestic demand should lead the way to revival, she believed and hoped the government would provide further tax incentives for long-term savings. A boost for infrastructure and education is also welcome.

Source:Economictimes