New Delhi, Sep 12 (GCBusiness) Indian Insurance sector, the world’s 15th largest, is projected to be worth USD 280 billion by 2020-2021, according to a report here.
Contributing factors include government impetus, economic growth, rising disposable income, and relaxation in regulatory norms.
Digitalisation and InsurTech, such as IoT, Machine Learning, Artificial Intelligence, Robo Advisers, and Blockchain have contributed to lower costs, customer awareness, transparency, and reduced false selling.
In 2017, insurance penetration in India was 3.69 per cent, against 5.62 per cent in Asia and 6.13 per cent globally, according to a report of Alea Consulting.
FY 18 saw the Indian Insurance sector grow at 12 per cent to 15 per cent. The segment has seen challenges of pricing, claim settlement and reduced up take of the insurance cover causing a drop in the growth rate.
The Indian Insurance sector, the world’s 15th largest, is projected to be worth USD 280 billion by 2020-2021 and is well poised to form part of top 20 insurer markets in the coming years.
However, the government is not discouraged by its result and is continuing its focus to ensure insurance protection to wider audience. The launch of the Ayushman Bharat – National Health Insurance Mission is expected to increase the insurance market by at least Rs 10,000 crore in the starting of FY 19.
Besides the growth, the insurance industry has also witnessed an increase in the number of fraud cases over the last couple of years. A growing number of organisations are recognising the fact that frauds are driving up the overall costs of insurers and premiums for policyholders, which may threaten their viability and also have a bearing on their profitability. To mitigate these risks, detailed framework of insurance fraud monitoring and due diligence measures are necessary.
In 1956, Life Insurance was nationalised as Life Insurance Corporation (LIC). In 1973, General Insurance was nationalised under four state owned entities. In 2000, General Insurance Corporation of India (GIC) was converted into a National Re-insurer and the Government permitted foreign investment up to 26 per cent and raised it to 49 per cent in 2015.
The Union Budget proposed in 2019, permits 100 per cent FDI for Insurance Intermediaries.
In May 2019, IRDA created a regulatory sandbox to experiment with InsurTech within the regulatory guidelines. In 2017, the Government approved disinvestment up to 25 per cent in state owned insurance companies, and divested 12.5 per cent stake in GIC and 11.65 per cent in New India Assurance Co. and IRDAI allowed private equity investors to be promoters in unlisted insurance companies.
Between 2016 and 2018, India’s digital consumer base was the world’s second largest and 2nd most targeted by cyber-attacks. While insurance companies like Tata AIG, ICICI Lombard, Bajaj Allianz, and HDFC Ergo have introduced products in Cyber Insurance, it is still at a nascent stage.
In 2017, IRDA mandated insurance companies and insurance intermediaries to set up an Insurance Self-Network Platform (ISNP) with IRDA to sell and service policies through e-commerce.
BSE has proposed Insurance Distribution Exchange, which is pending IRDA’s approval. If approved, stockbrokers registered with BSE will be able to distribute insurance products through the exchange.
Insurance companies are collating data on frauds. The Government notified a Money-Laundering (Maintenance of Records) Second Amendment Rules, 2017 under which linking existing policies to Aadhar and PAN/Form 60 is mandatory to avail insurance. To curb false trading, IRDA has prescribed a limit on the commission paid by the insurance companies to agents or brokers.
An insurance cover of Rs 1,00,000 is provided under the Jan Dhan Yojana. The scheme has 360 million beneficiaries with Rs.1 trillion in beneficiary accounts.
Ayushman Bharat Yojana provides insurance cover of Rs 500,000 for cashless treatment to100 million BPL families at a nominal premium of Rs.100 per month. The scheme has more than 15,000 empanelled hospitals that have treated about 2.6 million people from 346 million enlisted beneficiaries.
For Crop Insurance, Government offers Pradhan Mantri Fasal Bima Yojana, National Crop Insurance Program, Restructured Weather based Crop Insurance Scheme and Unified Package Insurance Scheme.
To hedge against increasing risks of natural catastrophes including climate change, cybercrime and terrorism, insurance companies require higher levels of reinsurance. Like other countries, India wants to retain most of reinsurance business for the ease of administration. GIC, the only Indian Reinsurance company, had a monopoly until 2017, when the Insurance Law (Amendment) Act, 2015 facilitated entry of Foreign Reinsurers through branches.
In 2018, IRDA scrapped the First Right of Preference given to Indian Reinsurers and retained their First Right of Refusal in reinsurance contracts. This has led to greater opportunities for foreign reinsurers as Indian insurance companies can seek quotations from other reinsurers besides GIC.
A rising middle-income group, increased FDI and greater public awareness are favouring the growth of the sector. Innovations in Insur-Tech are contributing to expand distribution and offer customized products. With the Digital India initiative, Microinsurance has potential.
To seek investments, the Union Budget 2019 has proposed to increase the minimum public share in listed companies from 25 per cent at 35per cent.