Page 19 - India Insurance Report 2023- BIMTECH

India Insurance Report - Series II 7

India’s insurance penetration and infrastructure are far below the global average. This requires a
collaborative framework that insists on total insurance penetration, led by a vision that embraces inclusion
and champions reforms to encourage enterprises to serve and strengthen the macroeconomic objectives.
The Government’s reformative agenda as an Owner must include all PSU insurance Companies becoming
world-class providers. The approach via ‘divestment’ as part of a grand transformation story should be
clear to all (A year after the listing of Life Insurance Corporation (LIC), the investors are scrambling for
cover as its stock is now trading down 40 per cent from the IPO price and 35 per cent from the listing
price. The story of ‘New India’ and ‘GIC Re’ stocks is more embarrassing to recount). Instead, the
approach to privatization goes via empowerment first. It is important to recall China’s efforts: The
Chinese government has ensured that the government-owned Chinese insurance companies, as
professionally managed entities, become vital cogs running the wheels of the Chinese economy and
furthering its strategic interests – all in a decade’s time. By prioritizing disaster risk financing, India can
lead in promoting awareness of the financial impact of disasters and also establish a regulatory framework
to enhance the financial capacity of insurance companies to cover disaster losses, manage climate risks
and build a resilient economy and society.

Pension sector reforms in India were initiated with the OASIS (Old Age Social and Income Security)
report of 1999. In 2004, the government formally moved to the National Pension Scheme (NPS). NPS
is now regulated under the Pension Fund Regulatory and Development Authority (PFRDA) Act 2013
and is a defined contributory pension scheme. All Indian states should agree that efforts to return to the
pay-as-you-go (PAYG) have serious fiscal sustainability implications. The OPS (Old Pension Scheme)
states would end up spending 2/3rd of their own revenues on pensions by 2046/47 with very few
resources left for development.
The International Financial Services Centers (IFSC) require high-level human capital specialized in
finance, particularly quantitative finance; state-of-the-art IT systems; trading platforms; a well-developed,
sophisticated, open financial system; a complete array of proficient, liquid markets in all segments; and
absence of protectionist barriers and discriminatory policies favouring domestic over foreign financial
firms in providing financial services. The experiences with leading global centers have demonstrated
that there is a cluster effect of all related professional services attracted by commercially-viable trading
and regulatory regimes along with high-quality and stable institutional environments. Mumbai, which
has the largest financial ecosystem in India, must be worked at as India’s global financial services center,
with symbiotic linkages to IFSC at GIFT City, Hyderabad and Delhi. This will also help India become
a Global Reinsurance Hub, at IFSC, Gift City, which has been under discussion since 2011 (Forty-First
Report of Standing Committee on Finance).

Finally, the 21 -century financial services must have a transforming Policy Framework: a) Principle-
st
based primary legislations that align the objectives across related streams, prudently avoid being overly
specific, empowers regulators with adequate powers to grow and supervise the market through secondary
legislations/regulations; b) An empowered regulatory setup that supervises through principle-based
regulations which are credible, responsible and proportionate, in line with global best practices. The
financial services, with inclusion and prudence as anchor values, require a reengineered framework –
fulcrummed on competition, specialism, innovation and a level-playing field that is prepared to offer
maximum governance. This task was facilitated through the Financial Sector Legislative Reforms