Insurance products should be simple: Chidambaram

[N.Sukumar]

Noting that India is among the under-insured countries, Finance
Minister P Chidambaram has said insurance products should be simple
and need to reach the rural population where penetration is low.


He was speaking after inaugurating the Canara HSBC Oriental Bank of
Commerce Life Insurance Company Ltd, a partnership between two of
largest nationalised banks and the Asian Insurance arm of the world's
largest banking and financial service group.

Applauding the partnership between the three giants-- Canara Bank,
Oriental Bank of Commerce (OBC) and HSBC Insurance Asia Pacific
Holding Ltd-- he said the new firm was the 19th life insurance firm to
be launched in India and that there were "six more in the wings".

The growing numbers indicate that India had the capacity to support
such a large number of companies and that there existed an "unmet
demand" for insurance products in India, he said.

Observing that the insurance penetration in India had been low, he
said India was among the under-insured countries.

He said insurance products also needed to reach the rural population
where penetration was low.

However, as a measure of caution and advice, he said "products should
be simple".



"Plain vanilla is still the best flavour for an ice-cream," he said
quoting an analogy.



"People in India are simple folks, who work hard and save. "I believe
that simpler the product, better will be the reception"



Those selling insurance products to rural customers, should understand
their language, attend to their concerns, he said while stating that
products should be such that they could easily comprehend and claim
benefit quickly.



Death claims must be settled immediately.



"There should exist a close bond between the seller and buyer of the
product," Chidambaram said, adding that tying up with public sector
banks offered an added advantage.



The new insurance company through its partnership with Canara and
Oriental Bank of Commerce would have access to over 40 million
customers and a nationwide distribution network of more than 4,000
branches.



“The company would provide a range of unit linked, traditional and
group products, including pensions. The company plans to penetrate
tier 1 and 11 cities and rural markets. The focus will be on consumer
awareness, cost effective distribution and affordable insurance
products”, said Canara Bank Chairman and Managing Director M B N Rao.



According to Clive Bannister, Group MD, Insurance at HSBC Holding, the
picture of India in the next 50 years reveals that there would be more
aging population that would want products to take care of their
assets.



Canara HSCB Oriental Bank of Commerce is held by Canara Bank (51
percent), HSBC Insurance (Asia Pacific) Holdings 26 percent and OBC
(23 percent).



The Board will comprise 11 directors of which four will be nominated
by Canara Bank, two by HSBC and two by OBC.



The Board will comprise two independent directors and a CEO. Rao would
chair the board.



The company will progressively increase its distribution coverage the
next two months to over 900 bank branches, serviced through 29
regional offices, said Harpal Karlcut, CEO of the new company.



To mark commencement of operations, eight underprivileged school
children were handed over policies on Monday.



The company had received the certificate of registration from the IRDA
last month to launch operations.

N.Sukuamr
Research Analyst