– By Naveen Chandra Jha
The coming decade is perhaps going to be a golden period for India’s insurance sector – be it life and non-life – full of opportunities and a few challenges, but the industry is in a position to take full advantage of the opportunities and forge ahead of challenges. The regulator has been in synch and has been ensuring that the regulations act as facilitator and not be a hurdle in the forward march of the industry. Let us see where the industry stands today and what the path ahead is.
Business growth
In FY24, non-life insurance companies’ premium income increased by 19.5% year-on-year to Rs. 1,14,972 crore (US$ 13.8 billion). The growth was driven by health, motor and crop Insurance. The number of non-life insurance policies witnessed a growth from 253.1 million in FY22 to 301.8 million in FY23.1 During 2022-23, the Indian non-life insurance industry underwrote a total direct premium of Rs. 2.57 lakh crore (US$ 30.77 billion) which was a growth of 16.40% over 2021.2
The rapid growth in the insurance sector can be attributed to the increased participation of private players, use of technology, product innovation, improvement in distribution capabilities and improvement in operational efficiencies. Post Covid, the sector is also getting a boost from the government’s initiatives like the Pradhan Mantri Fasal Bima Yojana (PMFBY) for crops and Pradhan Mantri Jan Arogya Yojana (PMJAY) for health insurance introduced specifically for the rural population. IRDAI’s initiatives, such as, Bima Vahak or women agents who go to rural areas with insurance offers, and Bima Sugam platform, a digital marketplace that makes insurance accessible even to remote areas by offering services like policy purchase, renewals and claims management.
Going forward, IRDAI has taken ‘Insurance for All’ by 2047 in a mission mode and is tweaking its regulations to help the industry achieve this goal. The government has recently mooted a bill to allow 100% foreign direct investments in the insurance sector. Along with competition, this will bring in further know-how and international best practices in the sector. The regulator is also planning to issue a lot many licences to private players.
In a recent announcement, IRDAI gave flexibility to insurance companies to fix an overall cap on commissions to agents, brokers and other intermediaries. The IRDAI Committee will soon bring in many more reforms allowing extension of the free book period, allowing agents to tie up with more than one insurance company which will have significant impact on the insurance industry.
These measures will help insurance companies to better manage their management expenses. IRDAI has been consolidating regulations and making them principle based, from the viewpoints of ease of doing business and encouraging innovation in the sector. For the industry thus, increased competition will bring in best practices and newer product designs on the one hand with affordable pricing and access to insurance seamlessly for the customer on the other.1
Moreover, the union budget tabled in Parliament last week by the Union Finance Minister, Nirmala Sitharaman, had proposals that could help improve insurance penetration. The big-ticket announcement of 100% FDI in insurance will play a major role by attracting greater capital inflows, promoting healthy competition, and integrating global best practices in India.
The proposed tax reforms, including TDS rationalization and increased thresholds for senior citizens, will help taxpayers and promote financial inclusion, which will eventually play a significant role in fulfilling the ‘Insurance for All’ by 2047 goal.
Breaking the mould
Technology and entry of private players with their now nimble-footedness and innovation in the past two decades have indeed broken the mould. The share of private players in the general insurance business today is 65% while the public sector holds 35%.
While the achievements of the insurance sector are significant, the penetration of general insurance is still negligible at 1.0% of the GDP as of FY23. Given India’s economic growth, this is no progress at all.
Opportunities and challenges
Currently, India is the 10th largest insurance market in the world. As per a Swiss Re’s report, India is expected to grow the fastest among G20 countries, with the total premium projected to grow at an average of 7.1% as compared with the global average of 2.4% during 2024-28. Swiss Re has also projected India to be the sixth-largest insurance market by 2032, surpassing Italy, Canada, South Korea, and Germany.
India’s ambition to be a developed country will need a large industry base which for the insurance industry will create huge opportunities. Its young and aspirational population too augurs well for the insurance industry’s growth. Further, in a rapidly evolving world, newer risks keep emerging, throwing newer opportunities for the industry. Cyber security and climate risks are on the top of the list.
With the help of technology, the insurance industry has brought in innovative products, such as, ‘pay as you use’ and the facility to buy insurance from home. The industry needs to bolster these efforts. Using available technology like AI and machine learning the industry needs to segment the population deeper, understand their behaviour patterns and bring in more and more customer-specific products that take care of their diverse locations and needs. By using platforms like programmable payments the customers can be offered adjustable payments of insurance premiums according to their ability to pay.
The players also will have to be operationally efficient and profitable at the same time. Digitisation has simplified and standardised the processes to enhance efficiency and productivity. Use of technology and existing infrastructure for onboarding new customers and for renewals can further save costs. Lastly, financial literacy for end-users, agents and employees to remove misconceptions about insurance will help bring in more business to the industry.
The industry is currently at the crossroads. With enablers like technology and some out-of-the-box thinking and customer-centric approach in designing new products, the industry is sure to achieve the regulator’s goal of ‘insurance for all’ and more.
(Naveen Chandra Jha is the MD & CEO of SBI General Insurance.)
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