Insurance companies are set to speed up their branch expansion plans in smaller towns following the finance minister's budget speech announcement that they would not be required to take approval from the regulator to open branches.
"Major players in the insurance sector have already begun to expand in the smaller towns and the announcement will further encourage the players open more branches in the semi-urban and rural areas," said Sunil Sharma, chief actuary, Kotak Mahindra Old Mutual Life Insurance.
In a bid to increase the reach of insurance products in semi-urban and rural areas, the finance minister P Chidambaram on Thursday said in his budget speech that insurance companies will not be required to take approval from the Insurance Regulatory and Developments Authority (IRDA).
Considering the low-level penetration of insurance products, insurance companies have always looked to open more branches in semi-urban and rural areas but their hands were tied by a clause that called for prior approval.
Penetration of life insurance products in India is around 4.5% while that of general insurance products is around 1%.
As the level of income is going up in smaller towns, the companies will move aggressively to acquire prospective customers.
"The share of middle-income class in the smaller towns is growing rapidly and they are in need of insurance products to provide security cover to their dependents," said Sharma.
"The expansion of insurance companies also means that insurance products will be easily available for customers in semi-urban and rural areas," said Swaraj Krishnan, CEO, Magma HDI General Insurance.
The insurers' expansion drive in smaller cities will be supported by another proposal by finance minister that says that a person having a bank account will not be required to fill Know Your Customer (KYC) forms to buy insurance products.
"Acceptance of the bank KYC is a huge positive and will facilitate convenience and seamless on-boarding of customers," said Sandeep Bakhshi, CEO, ICICI Prudential Life Insurance.