The Indian insurance industry is at an eventful and exciting crossroads. With the Indian economy aiming to become the world’s third largest economy by 2030; the middle class population of the country is expected to grow to over 47% by 2030-31 and by increasing awareness among individuals about the need for insurance, we have both the opportunity as well as the environment for growth. Penetration across both living and non-living segments has steadily grown indicative of the huge potential that is still being explored. According to Invest India, there is potential to add more than $7.8 billion annually between 2020-30 in estimated life premiums considering the existing protection gap.
The year 2023 accelerated the pace of this momentum with strong policy measures announced. The Insurance Regulatory and Development Authority of India (IRDAI) has already set the wheels for this with its ‘Insurance for all by 2047’ plan, an ambitious mission aligned with India’s agenda of inclusive growth. In 2023, we saw significant steps in this direction with work undertaken on a military basis towards preparation of the Bima Trinity – Bima Sugam, Bima Vistaar and Bima Vaahaks.
The Bima Sugam is envisioned to be a digital platform that will make information about insurance products easily available and accessible to consumers. At the same time, it is also likely to reduce distribution costs for insurers. Bima Vistaar is a unique insurance product that is believed to be instrumental in furthering the “Insurance for all” mission. Bima Vaahaks, mainly women, are considered to be the main drivers of access making the last mile communication efficient. Further, the announcement of state-level insurance plans with insurers assigned to specific states to target various districts, towns and cities in a systematic manner and deepen penetration will be a major boost.
Apart from this, the regulator pointed out to make insurance information accessible to consumers by setting up a panel to simplify the wording of insurance policies. While several of us in the insurance industry have already been working in this direction, the regulator’s attention to the issue will ensure continued progress on this front. It will become imperative as we begin to explore newer demographics and geographies in the quest to make insurance available to all. Simplicity in communication will not only make insurance accessible to consumers, it will also help us convey our proposition clearly. This also brings us to another key feature that will dominate the insurance landscape in 2023 – sensitivity to evolving customer needs. The year witnessed the development of a number of micro-insurance plans, customizations and several niche offerings that match customer life stages, making insurance a part of their financial aspirations. This has also meant that insurers segment customers thoughtfully and reach relevant offers and solutions when a customer needs them.
At the beginning of the year, the IRDAI issued new rules on commissions paid to insurers and intermediaries.(5) Raising the cap on commissions paid and allowing insurers to decide the proportion while maintaining Expenses of Management (EoM) was a game changer. This will allow insurers to motivate differently for different types of proposals, invest energies in product innovations and also positively impact penetration.
Technology, which has become indispensable to the industry, has and will continue to play a critical role in acquisition as well as engagement and retention. Many new entrants to the sector have built digital first/digital models while the rest of us use technology as a lever to improve our reach and optimize efficiencies and costs in the process. Embedding technology throughout the consumer lifecycle has also enabled us to communicate in a hyper-personalized way, helping engagement and retention. In an age where conscious consumers are spoiled for choice, accurate communication can make a considerable difference. The industry is increasingly leveraging technology for more complex but crucial tasks such as video-based KYCs, among other things. The potential, however, to use the latest technical innovations for risk-based assessments and to settle claims in real time in a fast and efficient manner and to customize offers is huge. At the same time, the industry is equally focused on protecting against cyber threats.
Clearly, 2023 was a year of remarkable activity for the insurance industry. It has given the sector a much-needed shot in the arm to train its sights on aggressive growth through technology-led innovation, hyper-customization and experimentation. The year 2024 contains many challenges and just as many opportunities, waiting to be explored.
This article is written by Ashish K Srivastava, MD & CEO, PNB MetLife. All opinions expressed are personal.