Bangalore: Noting that India is among the under-insured countries, Finance Minister P Chidambaram today 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 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%), HSBC Insurance (Asia Pacific) Holdings 26% and OBC (23%). 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 today.
The company had received the certificate of registration from the IRDA last month to launch operations.