2 years in the pandemic: Motor insurance industry India (with infographic)

Key Takeaways

In this article, we are looking to understand the effect of the last two years – 2019-2020 and 2020-2021 on the motor insurance industry in India. 

 

• Digital companies saw growth
• Commercial vehicles took a hit
• Start and stop policies rose.

Impact of the pandemic on the motor insurance industry in India

 

The last two years have been challenging for almost every sector, insurance was no different. It was challenged on every front from claims to premiums to demand. The Indian motor insurance industry was one of the most affected in the insurance space. Predictably so.

 

While health insurance saw a surge, motor insurance was struggling to gather speed amid lockdowns, low vehicle sales and a slowdown in the economy.

 

To get an idea of the impact of the pandemic on the motor insurance industry we collated their revenues from the IRDAI website.

 

For a brief overview of the industry and the changes, you can refer to the infographic below.

Revenue – 2018 = with per company divide

 

Revenue – 2020 = with per company divide premium in crores

 

Data from the IRDAI.com.

 

Our observations

 

1)  Digital companies are seeing growing traction

 

Covid has accelerated digital transformation across the industry. There has been heightened adoption and deployment of technology by both insurers and customers.

 

Increasing digital adoption accelerated by COVID-19 has helped online insurance company ACKO to post a 120% increase in the number of auto insurance policies sold in Q1 FY22 vs. Q1 FY21. Edelweiss too saw growth as it focuses on digital insurance.

 

2)  SBI saw stability with the launch of their digital app

 

State Bank of India launched its digital platform YONO (you only need one) into a separate entity allowing other banks to use it. Using a \’pay per use model,\’ the lender expects to attract small banks, regional rural banks (RRBs), and cooperative banks to the platform.

 

Other banks need to connect with the YONO API without going through the SBI\’s core banking system. Once the integration is done, other banks can use the platform by connecting the API with their back end. This will enable other banks to use the YONO platform with their branding.

 

3)  Navi insurance saw growth with the launch of their app

 

After the lockdown and the RBI moratorium on loan repayments, India\’s fintech ecosystem has had pretty dreary one-and-a-half months. As customers\’ expectations evolve, fintech companies have to come up with unique models to cater to the untapped and underserved audiences.

 

The Navi app is a consumer lending app that offers a collateral-free loan with a higher limit of INR 2 Lakh for individuals with a monthly income as low as INR 10K.

 

4)  Commercial vehicle markets took a hit

 

With most companies adopting the work-from-home policy, there was a drastic reduction in the number of motor vehicles on Indian roads. This has resulted in a nationwide reduction in the number of kilometers driven. From mid-March through August first week, the total number of kilometers driven is down by more than 50 per cent countrywide.

 

Challenges faced by the motor insurance industry have also increased. Lack of purchase of new vehicles is one of the biggest challenges. With slumping sales and increasing inventory in the warehouses, the auto industry is truly challenged. This has also affected the industries which support the automotive industry in one way or the other.

 

5)  Rise of tart and stop policies

 

The industry is ever-evolving, in the middle of the pandemic when commercial vehicles found it difficult to pay, the government of India stepped in with certain relaxations for them.

 

This also gave a push to the start and stop policy which has started to look like an enticing offer.

 

Conclusion

 

The pandemic has heightened the importance of Insurance. The Indian customer has always been valued conscious, and Covid has made them even more so. They are looking to save all they can and pay only for what they are consuming.

 

In a crisis like this, everybody is looking for options that would bring down their operational costs. Everybody is looking out for options that might reduce their financial burden in such situations. In the Q121 we can already see the market growing and stabilising. While it is slow. However, we are hopeful for the future and know that it will adapt and adopt to the current realities.