For many years India had a very traditional insurance marketplace, with Life cover being central to the operations of most of the big players there. Government regualtion was strict, and companies from the USA or Europe had many obstacles in their path when it came to building a base there, or entering into partnerships.
But all that is changing rapidly, partly due to the tremendous economic growth that has transformed much of the country over the last two decades. A rising middle class are now buying cars, motorcycles, luxury consumer brands and travelling the world as part of their career path.
Huge Rise in GWP and Policyholders is Predicted
The India Brand Equity Foundation (IBEF) suggests that gross premiums written in India reached Rs 5.53 trillion (US$94.48 billion) in the 2018 financial year, with Rs 4.58 trillion of that total (US$71.1 billion) coming from life insurance and Rs 1.51 trillion (US$23.38 billion) from general insurance. Life cover then, remains an integral part of the Indian market and has been given a boost recently by the Indian government, who are keen to promote life and healthcare insurance to all sectors of the population.
It is worth noting that about 35% of the total health insurance GWP collected are for the National Health Protection Scheme, which was set up in 2018 to offer some kind of healthcare for the poorest sectors of the population. This is part of the reason why the Life/Health market looks so dominant to UK investors – there is no NHS in India, you have to pay something in to get treatment when you’re ill, or injured.
Interestingly, the IBEF estimates the entire GWP generated within India will be worth some $280bn in 2020, which is a huge expansion; in effect it more than doubles the size of the insurance market in just two years. The IBEF also note that while the Life market is set to grow by about 3.6% next year, the non-Life sectors will average just under 15%. Meanwhile ResearchAndMarkets latest report estimates growth of about 24% in non-Life, with expansion accelerating nicely until 2023.
PwC published a report earlier in 2019 and estimated that some 829 million Indian citizens would be policyholders by the end of 2021, compared to 429 million in 2017. Again, pretty much 100 percent increase in the market. The report also noted that some 55% of all consumers still bought insurance face-to-face from a broker or local agent. The day of the Man From The Pru is not quite over! However, technology is changing things fast, with 21 insurance comparison sites licensed to operate in India, plus insurers are investing in digital portals, with chatbots being used to communicate with customers. Read the PwC report in detail here if you want more analysis.
So insurers would be wise to forge partnerships right now. Especially as the Indian government has recently relaxed the rules on foreign company investment – overseas insurers can now own 100 percent of a local intermediary, not just 49 percent. A profound change and an indicator that this market is really becoming more open.
Tech is Disrupting The Market
Whle demand for Life and Health cover has risen a modest 3.6 percent in the last year, whereas the take-up on other types of insurance is almost 15 percent. Key areas are cars, motorcycles, mobile phones, cyber protection, plus many more niche products like cover for Dengue fever, or losing your spectacles.
The impact of technology is naturally skewed towards the bigger cities across India, but the low cost of smartphones will inexorably lead to a spike in demand for all kinds of insurance, many of which may be micropayment, sold via retailers, or prompted by advice from extended family and friends networks. Insurers are already taking advantage of the opportunities in India, and deploying the latest underwriting, risk and data handling tech including blockchain.
If you can digitally timestamp secure payments, locations and consumer details, then you can obviously do away with much of the old fashioned paper admin that is currently involved with selling insurance across much of India.
US company Marsh has a joint venture in India with Rampart Trust, and they recently bought control of JLT Independent Insurance Brokers, subject to regulator approval. Marsh also have a deal with Uber, which means drivers can get real-time cover, essentially PAYG. This is a complete change to the traditional Indian taxi insurance, which would involve sheaves of paper and an annual policy, possibly sourced via one of India’s 400 or so insurance brokers.
A new start-up company, Toffee Insurance, launched Dengue fever cover last year. This short term policy covers the monsson season, when the risk of mosquito bites is highest, and it highlights how local entreprenuers can design an insurance product that is perfect for the local market, with angel ivestors on board. Toffee also offer micro insurance on lost spectacles, global backpackers cover and an interesting commuter insurance product, whoich basically covers your medical costs no matter what type of vehicle you are using as a passenger; bike, scooter, car etc.
Millennial Frustration Will Drive Profound Changes
One of the founders of Symbo, recently told the local press that his father had been an insurance agent and was `basically selling the same products in 2017 as he was in 1974.’
It is that exasperation with the old ways which is driving the pace of change in India right now. Symbo looks to offer you cover on healthcare, commuting on two wheels, or simply a single work-out at the gym, with the risk assessed via AI algorithm, so that potential hospital costs can be covered instantly. Essentially Symbo are panelling out the risk and using personal data, crunched via machine learning, to calculate the premiums. Some might say that’s how all travel and motor insurance should be – not a boring annual policy based on your job and postcode.
Some opportunities for start-ups and established insurers are prompted by new legislation. For example, in 2019 the Indian government made it mandatory for all scooter and motorcycle riders to have Third Party cover as a minimum. The result was a 38 percent rise in TPO policies, with a slight decline in take-up for policies that cover the actual machine itself.
But while new emissions laws look likely to depress the Indian two-wheeler market in the short term, the real action is now focused on electric bikes and scooters. Investment is pouring in, and models like the Tork motorbike, and Bajaj Chetak EV, will bring new, younger riders onto the road. That could open the door for entrepreneurs keen to bring a flexible, PAYG product to the electric market, which meets the legal minimum, and offers customisable benefits like accident damage, loss of earnings, or medical treatment, theft, passenger cover etc.
The great thing about data-driven tech is that it allows a truly personalised quote, and that is something that everyone in India, everyone around the world, can relate to.