Indian Insurance Industry is growing in double digit. Insurance penetration in India has been low but rising (FY 15: 3.3%, FY16: 3.4%). In FY18, it is expected to improve to 4%+. Given the changing demography, rising middle class, government digitization policies, insurtech investments and regulator initiatives, the industry is expected to continue a good run for next decade. Based on discussions with multiple industry thought leaders, below are prediction for 2018:
- More Public and Private Capital: Capital flow in the industry is on steroid. 5 Insurance companies (ICICI Lombard, GIC Re, New India Assurance, HDFC Life, SBI Life) raised around $7 Billion in recent past. 2017 also witnessed entry of 4 new players (Acko, Digit, DHFL General and Edelweiss General) with significant private investments. The trend is expected to continue with existing investors, large private equities, large retailtechs and global insurers looking to make the most out of the best years of Indian insurance industry.
- More Technology Influence: The industry is at a cusp of innovation. The scale and opportunity would be compromised if technology is not brought to the fore front. Top 5 insurers seem to be leading from the front. With Acko and Digit’s purely digital insurance company foray and with Flipkart and Amazon eying for a pie in insurance, 2018 would see further acceleration of technology investments and innovation. Bancasurance is one of the most effective channel for several private insurance companies contributing a large part of new business premium. This channel is ripe for technology.
- More Power to Intermediaries: There are 1000+ intermediaries excluding captive agents of insurers. Traditionally most of the intermediaries considered this to be a lifestyle business. Huge growth of private insurance players has opened up flood gates for intermediaries. While PolicyBazaar continues to dominate the online aggregation, the new web aggregator registrations have gone up by 40% in last 18 months with eye on raising the capital. Some of the existing brokers with new generation, young leadership and professional outlook (JBB Group, Navnit Broking, Zoom, Raghnall to name a few), are now looking to adopt technology to grow and expand the reach.
- More at bottom of the pyramid: Broadly the crop insurance, micro insurance, insurance for low-income urban population presents a significant opportunity for all stakeholders. Indian government has launched several insurance schemes to increase the coverage of crop insurance form 22% to 50% over next 2 years. Government has also sponsored health insurance coverage for below poverty line construction workers, street vendors and other poor self-employed. With regulator’s initiative of point-of-sale person, the penetration and density of the insurance is expected to increase and reach bottom of the pyramid.
- Beginning of Conversational AI: With the growing and varied market (language, culture, income, age etc), multiple distribution channels (agents, brokers, web aggregators, corporate agents) and multitude of products, conversational AI will become a key aspect of advising the customers and servicing the customers. This can also overcome the risk of misselling and help increase the trust of the customers who carry doubt and fear about the insurance industry.
- Beginning of Commercial Insurance Automation: Commercial, business and group insurance is still largely offline and takes on average over 6 weeks from start to finish. This can be shortened to 3 weeks or less with the use of technology in underwriting, transfer of information, image processing and machine learning. The processes and rules can be configured to empower the intermediaries for issuing low risk policies faster. With retail market getting crowded, commercial insurance presents opportunity for technology innovation and for intermedieries.
- Beginning of IOT: IRDAI constituted a 10 expert group to include wearables, portable devices and telematics as part of insurance framework. This would act as catalyst for insurers to start thinking differently about risk improvement, risk assessment and product design. Aditya Birla Health Insurance has launched “Activ Health” where policy holders can earn upto 30% premium back as a reward for their health activities (# of steps, minutes in gym etc). This may impact customer behavior and perspective towards insurance. This may help reduce claims fraud.
Overall, there couldn’t be more exciting time for Indian Insurance industry. As per BCG report Indian Insurance industry would be in top 5 globally over next few years. Growing market and large capital deployment will get the product and innovation out of the industry.