Key Takeaways
- There have been some major investments and developments in the Indian insurance sector over the past year. Many companies are trying to leverage strategic partnerships to offer different services.
- The growing middle class and the young population is growing more and more aware of the need for insurance, which is also contributing to the growth of the Indian insurance sector.
- Between 2010 and 2019, the world average growth in premiums (life and non-life) was 3%. Over the last three years, the growth in premiums across emerging markets (including India) has been steady.
InsurTech or Insurance Technology is here to change how we distribute products and sell insurance to customers using deep tech to price and underwrite policies.
It is basically the technology that lies behind the innovation in insurance. Not only is it a budding niche for startups (and venture capitalists) it is also improving the entire insurance industry and bringing value to customers. The industry is at a point of change and InsurTech companies are leading the way forward.
In this article we look at some of the trends to look forward to in the Indian InsurTech ecosystem in 2022, these are simply what we can see, however, after 2020 we know that life can be unpredictable in the simplest ways.
Let’s get started:
More Strategic Partnerships as seen in 2021
There have been some major investments and developments in the Indian insurance sector over the past year. Many companies are trying to leverage strategic partnerships to offer different services. For example, ICICI Lombard and Vega collaborated in November 2021 with each other to offer a personal accident insurance cover. So, every time you buy a Vega helmet online, you’ll be offered insurance. This is a move to raise road safety awareness.
Similarly, it is expected that HDFC Life’s position in South Asia will become stronger after the Competition Commission of India approved HDFC Life Insurance’s acquisition of Exide Life Insurance.
More use of IoT
IoT, or Internet of Things, has become integral to the insurtech industry. It allows insurers to make quick and accurate decisions than the traditional claims process. In the Indian insurance market, the scope of IoT goes beyond customer risk assessment and telematics; there are also use cases in active monitoring of assets. There are about 110+ insurtech start-ups operating in the country currently.
Growth due to better financial understanding of citizens
The growing middle class and a younger population being aware of the need for insurance, which is also contributing to the growth of the Indian insurance sector. There is a growing demand for insurance and insurers are also adapting to reach more people.
For example, trade credit insurance was created to offer businesses a safer and more secure way to grow. The demand for trade credit has been growing for several years, and the pandemic made its need more apparent than ever. In a conversation with Akshay Bhardwaj (Senior Vice President – Trade Credit, Structured Finance, Political Risk Insurance & Sureties at Marsh & McLennan Companies), he said that globally, the trade credit insurance business has been/ growing at a steady pace of 2-5% depending upon the region and the country. On the retail insurance side (or personal lines), the pandemic has increased awareness and penetration of health insurance.
Growth at 3%
Between 2010 and 2019, the world average growth in premiums (life and non-life) was 3%. Over the last three years, the growth in premiums across emerging markets (including Indi a) has been steady. From 0.8% in 2020, it is now 7.4% in 2022 in emerging markets around the world. Over the next 3-5 years, the life insurance industry in India is expected to grow 12-15% per annum. According to an IBEF report, the gross direct premium income for the general insurance industry in India was Rs 1,087 billion in FY22, an increase of 12.3% YoY.
More focus on rural areas than before
Insurance penetration in India is still low. However, there are many opportunities and possibilities of expansion into the rural space in India which will lead to more risk being managed. In a conversation with us, Sagar Sanyal, director of technical services at Zoom insurance brokers, said, “There are very few branches in rural areas and not enough private companies want to set up branches there. Therefore, training manpower from the areas can truly help growth in such areas.” While it is a difficult space, more and more companies are focusing on the rural sector.
Microinsurance is on the rise
Microinsurance is a type of insurance that is designed to offer insurance coverage for specific risks. It breaks away from traditional insurance to form something smaller – coverage for a one-day trip, one-time injury, one-time event, or other specific health needs. For eg. Trip insurance. This is a personal accident/disability policy that is only active for a certain trip, like a cab ride.
Microinsurance is now on the rise and is aimed at low-income groups. The liberalisation of the insurance sector and the presence of government schemes created more opportunities, awareness and demand for microinsurance.
Digital insurance continues to grow
Thanks to technological advancement and the pandemic, insurers are more comfortable with processing claims online. Similarly, many InsurTech start-ups are making the customer experience smoother and simpler. Describing digital insurance, Atul Mehta, Executive President at Go Digit tells us, “I think digital insurance is all about streamlining the customer and the distributor’s experience in a way that there is minimum human intervention. The human intervention is only during the context-setting or running the transactions in a particular fashion and the end output and the user experiences are all on the digital medium. This could be a portal or could be via any handheld device.”
Ayushman Bharat Digital Mission
The Ayushman Bharat Digital Mission (ABDM) aims to create a UPI-like health infrastructure. It will lay the groundwork to standardize healthcare and digitize health records. After healthcare service providers come online, you can upload your health records and any healthcare provider can ask you for consent to access your records, without you having to carry bulky files anywhere. The long-term plan is to bring health insurance under this system. Currently, this is live in Union Territories and is expected to expand to other states in 2022.
Non-traditional insurance distribution is growing
Companies like Ola, Phone Pe, IRCTC are now offering microinsurance plans such as coverage for missed flights due to driver cancellation, vehicle insurance, death in case of rail accidents etc. InsurTech helps simplify insurance distribution. Such non-traditional channels of insurance distribution are growing and we are likely to see more of this in the coming year.
Obstacles to face
While there are many positive trends to look forward to in the Indian InsurTech ecosystem there are some obstacles to consider as well. The pandemic caused a huge spike in claims and if insurers are not well-capitalised, they will not be in a position to continue doing business. Customers are also looking to operate online so insurers have to find a balance between physical interaction and embracing technological change. Moreover, with everyone working online, there is a greater risk of cybercrimes, which is why more and more people will have to opt for cyber insurance as well.
Conclusion
The good news is the outlook for the insurance market looks promising in 2022. According to a study carried out by the Swiss Re Institute, the global demand for insurance may grow up to 3.9%, which could mean one of the fastest rallies for the industry. As for the end of the year 2021, it could end with a growth of 3.3%.