The insurance regulator, IRDAI, has set growth targets for both general as well as life insurance companies. CNBC-TV18 reported on July 15 that the targets (see table below) had been set for life insurers. Now, ICICI Lombard has confirmed that the same has been done for general insurers as well.
"Every company has been asked how they can contribute more. There have been discussions between IRDAI and general insurance companies on growth targets," said Gopal Balachandran, CFO, ICICI Lombard.
It is unprecedented for any regulator to assign growth targets for companies but not anymore. The insurance regulator IRDAI has proposed to set growth targets for individual insurance companies based on gross premiums written by them. Gross written premium is a sum total of new business and renewal premium.
The basis for arriving at these targets
These premium targets have been set depending on the past performance of these insurers, their distribution network and their current premium base. As per sources, IRDAI has also asked all life insurers to submit a roadmap on how they plan to achieve these targets. CNBC-TV18 learns that the premium growth targets proposed by IRDAI are in the range of 15 to 50 percent.
It doesn't end there. To ensure compliance to these premium growth targets, IRDAI is also considering linking a part of the MD's and/or CEO's salary or compensation to the performance of the life insurance company on these targets.
What the targets look like
According to sources, LIC has been given a premium growth target of 15-20 percent. Companies like HDFC Life, ICICI Pru Life, SBI Life and Max Life have been given a target of about 30 percent. Companies like Aditya Birla Sun Life, Bajaj Allianz Life, Tata AIA Life and Kotak Life Insurance have been given a target of 40 percent.
Can companies comply with these targets?
Companies like HDFC Life, ICICI Pru Life or SBI Life have never so far come even close to the proposed growth targets.
However the insurance industry has expressed its reservations on the proposal. According to life insurance industry, such growth targets should not be imposed on companies as it may lead to increased instances of mis-selling, lack of discipline in underwriting and could also take the focus away from protection products.