Aggressive moves in general insurance
The Insurance Laws (Amendment) Bill, 2015, was finally passed, a development will engender far reaching changes for the industry, across life and non-life insurance sectors
The non-life insurance industry has registered an impressive 16% compounded annual growth rate in the past 10 years, much higher than India’s gross domestic product (GDP) growth rate. The share of non-life insurance premium to total insurance premium has accordingly risen to 21% compared to 18% a decade ago. But penetration as a percentage of GDP remains low at 0.8%. Considering the penetration levels in other BRIC nations (Brazil, 1.7%; and China, 1.3%), India has a lot of ground to cover. This increase is important not only for this industry—research shows that there is a robust causal relationship between insurance penetration and economic growth.
Year 2015 may well turn out to be the year that provided much needed boost to the industry to propel ahead at a faster pace. The industry that employs 700,000 individuals either directly or indirectly has a lot to look forward to in the new year ahead.
The Insurance Laws (Amendment) Bill, 2015, was finally passed, a development will engender far reaching changes for the industry, across life and non-life insurance sectors. Enhancement of foreign stake in insurance companies to 49% has already resulted in many foreign partners increasing their stake in their joint ventures, bringing in long-term capital, which will help build distribution capacities, encourage product innovation and enhance service offerings, ultimately benefiting the end consumer.
There is, however, more to the it than the well-publicized enhancement of foreign direct investment (FDI) limit. Providing authority and flexibility to the insurance regulator to introduce new regulations will enable introduction of consumer friendly rules that are more contextual. At the same time, regulations to expand distribution will help expand the industry’s collective reach. Allowing branches of global reinsurers should bring in more capacity and capability to the market place, judicial application of which would ultimately benefit the Indian consumer.
The non-life industry has witnessed a radical shift over the years. From being a corporate centric business till a few years back, the retail segment now accounts for around 60% of the business. Segments such as health insurance have created a niche with standalone companies joining the fray. The segment continued to be among the fastest growing segments in 2015, rising by more than 20% during the current year. It is encouraging that today more than 250 million Indians are covered by health insurance, driven by social health insurance schemes. From offering basic plans to comprehensive ones with sum insured of 50 lakh and more, insurers continue to move up the ladder. With initiatives such as Universal Health Cover expected soon, health insurance will continue to gain traction in the near future.
For the industry’s largest segment—motor insurance—it was a mixed year as sale of new cars failed to revive in the first half. However, there was some respite with new launches around the festive season witnessing a good response. Having said this, the larger renewal market has huge potential given the underinsurance in mass segments such as two-wheeler insurance. The successful launch of simple yet innovative products such as long-term two wheeler insurance this year, which offers cover up to three years, will help increase penetration among the currently estimated 60-70% uninsured two-wheeler population.
Among the other big shifts in 2015 was the increasing focus on service offerings. As product parity becomes a norm, insurers are rightly focusing on enhancing their service quotient. Technology is being embraced in a big way to enhance the purchase as well as service experience. From offering complete access to services through their websites, non-life insurers moved up the curve in 2015 to offer customers comprehensive ‘Do It Yourself’ facilities through mobile apps. Using GPS on smart phones, customers can now locate the nearest hospital or garage, and also renew their policy through a ‘Photo Quote’ (take a picture of the existing policy of one company and submit it through an app to receive the quote for renewal from a competing company). Customers can also stay updated on the claim settlement process.
As attention to service gains traction, ensuring the right claim settlement experience is taking centre stage. The regulator has also introduced customer-oriented regulations, with insurers required to publish their claim settlement ratio and speed of claim settlement in the public domain on a quarterly basis. This should help customers base their purchase decision on the right factors, including the claim settlement record capability, and not solely by price. With the regulator pushing insurers to take complete ownership of the claim settlement process, customers can look forward to improved service and claims experience.
The year continued to witness multiple catastrophes including the recent Chennai floods, avalanches in Afghanistan, earthquake in Nepal, among others. Such events bring to fore the need to insure one’s assets. But non-life insurance witnessed limited and short-term response in terms of demand, even in segments such as home and travel insurance. Amid a rise in natural and manmade catastrophes, customers are yet to realise that non-life insurance is an absolute necessity. It is imperative that the industry, government and other stakeholders work towards changing consumer mind-set on this front.
The year was an eventful year for the non-life insurance industry. With several enablers at play, the stage is set for the non-life insurance sector to shift gears in 2016.
Bhargav Dasgupta, managing director and chief executive officer, ICICI Lombard General Insurance Co. Ltd.
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