An Overview of the Insurance Industry In India

The insurance industry in India is a pool of insurance companies hedging insurance seekers against risk through the means of insurance contracts. The contract is an agreement between the insurer and the insured in which the payment of the former guarantee for an uncertain event against a premium paid by the insured regularly. The premium is mentioned in the contract.

Insurance is a method of risk management to protect people and assets from uncertain losses. Life Insurance is precisely planned to protect your legatee financially in case something unfortunate happens to you. For investors, insurance is seen as the slow-growing, safe sector when compared to other financial sectors.

The Insurance Industry in India
The Insurance Industry Market Size in India
The Insurance Industry Challenges
Government Initiatives
The Future of Insurance Industry in India

The Insurance Industry in India

The insurance industry in India has two major players:

• Life Insurance Corporation of India (LIC)
• General Insurance Corporation of India (GIC)

However, there are 58 insurance companies in total among which 24 are life insurance companies. Most of them have international ties.

Under the life insurer segment, LIC is the sole public sector company while there are six public sector companies in the no-life insurer vertical. GIC is the sole national re-insurer in the industry. The chain has many players such as brokers, surveyors and third party administrators serving health insurance claims.

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The Insurance Industry Market Size in India

The government has always pushed for insurance penetration in the economy. As per the data from sectoral regulator IRDAI, gross direct premiums of non-life insurers in India grew nearly 7% to Rs 14,809.27 crore in June this year while the 34 non-life insurance companies in the country had reported gross direct premium of Rs 13,842.27 crore in June 2020.

Of these, the 25 general insurance companies registered a 4.9% rise in gross direct premium during the month at Rs 13,041.51 crore as against Rs 12,435.71 crore in the year-ago period.

The five standalone private-sector health insurers witnessed a 46.6%  jump in gross direct premium at Rs 1,556.89 crore from Rs 1,061.94 crore in June 2020.

Two specialised PSU insurers– Agricultural Insurance Company of India and ECGC Ltd — reported a decline of 38.8% in combined gross direct premium during the month at Rs 210.87 crore from Rs 344.62 crore a year ago.

Cumulatively, the premium written by all the players during April-June 2021-22 was up 13.8% to Rs 44,434.96 crore as against Rs 39,054.82 crore in the same period of 2020-21.

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The Insurance Industry Challenges

1.  Using data to improve experiences

Using data to improve offerings and customer experience is not new for the insurance industry. But doing this well and consistently is a challenge. To use data for better customer experience companies need to leverage digital insurance solutions. The use of an agile cloud system and data analytics can help companies meet customer demands. Chatbots, mobile applications, and AI-generated quotes could be the best solution possible now.

2.  Commoditization

Insurers are consistently trying to get new customers while retaining their present ones. Providing lower rates than their competitor is the best way to do that. But along with this modern consumer decides to purchase insurance based on how they are treated by the insurance company working with them.

Commoditization is the process of treating someone as if they are a mere commodity. The “commoditization” of insurance that has received so much press is a misnomer. Insurance is not a commodity but a complex good.

This challenge can be overcome with the help of Artificial Intelligence and automated process which can provide a personalized yet fast customer experience. Digital insurance technologies also help to create unique products quickly.

3. Digitizing small businesses

Small businesses are the most profitable market in the insurance industry. Even though big insurance companies are aggressively trying to move into this market. But this can cause loss to companies who are already serving small commercials.

To maintain their customer base and expand the insurance companies serving small commercials should provide digital interactions and digitize underwriting and claims. Investing in employees and new talent can help them expand their existing business and acquire new customers.

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Government Initiatives

The Government of India has taken several initiatives to boost the insurance industry. Some of them are as follows:

• The government has announced an increase in the Foreign Direct Investment (FDI) limit in insurance from 49% to 74% in the union budget of 2021-22.
• The government has also taken an initiative to provide for 100 million poor and vulnerable families under the National Health Protection Scheme that was launched in September 2018.
• To boost the safety of farmers' crops and ensure the maximum benefit of crop insurance reaches farmers, the government of India has allocated Rs 16000 crores for Pradhan Mantri Fasal Bima Yojana (PMFBY) for the fiscal year 2021-22.
• The Insurance Regulatory and Development Authority of India (IRDAI) plans to issue re-designed initial public offering (IPO) guidelines for insurance companies in India that are looking to divest equity through the IPO route. IRDAI has allowed insurers to invest up to 10% in additional tier 1 (AT1) bonds that are issued by banks to augment their tier 1 capital; this will help expand the pool of eligible investors for the banks.

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The Future of Insurance Industry in India

The future looks promising for the life insurance industry in India. Several changes in the regulatory framework have been proposed which may transform the way the industry conducts its business and engages with customers.

As per the data from sectoral regulator IRDAI, the gross direct premiums of non-life insurers in India grew nearly 7% to Rs 14,809.27 crore in June this year. The general insurance industry is expected to increase by 7-9% in terms of gross direct premium income in FY22, backed by healthy growth from the health and motor segments.

Demographic factors such as the growing middle class, young insurable population and retirement planning will support the growth of the Indian life insurance segment.

FAQs

What does the insurance industry do?

The insurance industry sells the financial product as a method of risk management to protect people and assets from uncertain losses. It pools funds from various insured entities to pay for the losses incurred. However, not all kinds of risks are protected through insurance. For a risk to be ensured it should meet certain characteristics.

What type of industry is insurance?

Insurance is a financial service industry.

What are the 4 types of insurance?

The 4 types of insurance include:

• Motor insurance
• Health insurance
• Travel insurance
• Home insurance

How large is the insurance industry?

As per the data from sectoral regulator IRDAI, the gross direct premiums of non-life insurers in India grew nearly 7% to Rs 14,809.27 crore in June this year. The general insurance industry is expected to increase by 7-9% in terms of gross direct premium income in FY22, backed by healthy growth from the health and motor segments.

Which is the biggest insurance company in India?

Life Insurance Corporation of India (LIC) is the biggest and oldest insurance company in India.

How many insurance companies are there in India?

There are 58 insurance companies in total among which 24 are life insurance companies and the other 34 are non-life insurance companies.