Insurance Industry Hits and Misses over the Decade

The Insurance Industry in India has been the reflecting factor to determine the country’s economy since the pre-independence period. There are multiple players both nationalized and private who have been advocating and promoting the significance of insurance among the people. As per one of the statistics, the average gross premium sums to over 5 trillion just from the life insurance companies. Even having such a high figure, the penetration is quite low when compared globally. This definitely leaves behind the scope for improvement and enhancing the penetration of insurance in India. Now, let’s have a look at some of the hits and misses experienced by the insurance industry over the past decade.

The rising share of the web aggregators/insurance brokers, better understanding of high-risk covers among the policy seekers, increasing focus on wellness-related products, and inclusion of innovative technologies like Artificial Intelligence, IoT, etc has been the driving factor to enhance the processes and sales in the insurance industry in the past few years.

As per the statistics, there has been an increase of 12.3% year-on-year in FY22 which points towards its increasing demand in the personal accident and health segments. There has also been seen an increased investment to improve the financial status of the companies. The increase in the young population’s investment has also driven insurance coverage. Moreover, different government initiatives such as Ayushman Bharat PMJAY, etc are also the accelerating factors in enhancing the penetration of insurance. In addition to this, the inclusion of digital and online mediums into the insurance domain i.e. the introduction of InsurTech has witnessed some considerable positive change in the past few years. Currently, web aggregators also contribute a good percentage towards the digital insurance move.

Apart from all of this, the insurance industry has seen some good numbers owing to the introduction of new customized/customer-centric insurance products, vibrant channels of distribution, robust demographic factors, and increased partnerships. One such introduction of plans includes an immediate annuity plan which is best suited for people who are nearing retirement. The perk of this policy is that one can take loans against the policy or the surrender value.

Talking the Indian Motor Insurance Market, the market has experienced a growth of 11.36% CAGR from 2012 to 2018. The premiums themselves accounted for approx. 39.4% of the overall non-life insurance premiums in 2018. However, the COVID situation had an immense impact on the auto industry and a fall in the motor insurance policy was also observed. The auto insurance business, in particular, suffered a lack of client focus. While few other insurance products continued to profit from the pandemic’s digitization drive, internet search rates for vehicle insurance products have also experienced a considerable drop.

On the other hand, business premiums have witnessed a 16% Year-on-Year growth as per IRDAI, and the life insurance industry experienced a growth of 21% higher on Feb 21 as compared to 2020.

During the initial years, life insurers have struggled to make their presence among the policy seekers and profit. However, by concentrating on three priorities – customization of the customer experience, adaptable product solutions, and talent strategy, insurers have reinvented themselves/their processes and regained their crucial position in consumers’ lives. As per a report shared by IRDAI on Jul 20, there are altogether 34 general insurance companies (which includes the ECGC and Agriculture Insurance Corporation of India) and 24 life insurance companies that are operating across the nation. The insurance market is an immense one and has been mounting at a rate of 15-20%. Having said that, the insurance services along with the banking service add up to 7% of the country’s GDP. This sort of evolved insurance sector offers a long- term funds for infrastructure development and also strengthens the risk-taking ability of the country.

Furthermore, in the past year, the life insurance industry has experienced a massive change with its inclusion of digital platforms in every little stage of insurance issuance owing to the pandemic. The Net Business Profit (NBP) on Mar 21 grew by 70% & in FY 21 the NBP grew from 7.5% to 2.78 trillion compared to 2.58 trillion in FY 20 & 2.14 trillion in FY 19. It is said that the digital push would definitely drive the life premiums.

On the other hand, the healthcare market has increased three-fold as per the recent report of IBEF. In the previous budget, the country’s public expenditure was 1.2% of GDP, and the GDP income underwritten by health insurance companies was raised by 13.3% YoY in FY21. A 29.5% share in the total gross written premiums earned in the country was through the health segment. About the recent developments, the Indian medical tourism market was valued at 2.89 billion USD in 2020 and is expected to reach 13.42 billion USD by 2026.

Talking about the misses over the decade, the insurance company has been heavily focusing on increasing the penetration but had increased the premium rates due to additional taxes. This seems to be contradicting as the government launched few health-related and other plans for the safety of one sector of the society meanwhile imposing heavy taxes on the other products purchased by other working groups. However, the recent budget definitely brought some hopes, but there again needs to be a united approach among the different entities in the insurance business to enhance the penetration in a positive manner, and not only focus on the numbers but also create a strong digital framework.

The bottom line here is that the insurers are now focused on confronting a variety of issues, ranging from economic obstacles such as the possibility of persistent inflation to sustainability concerns such as climate risk, diversity, and financial inclusion, as well as quickly changing consumer product and purchasing preferences. Moreover, a change in focus has been observed for improving the client experience by automating procedures and delivering personalized assistance wherever needed. Summing up, there can be seen a clear road of vast opportunities in the insurance industry both in urban & rural areas. Making a structured and informed us of this opportunity can help the insurance sector save more lives in the coming future.


Authored by: Mr. Rakesh Goyal, Director, Probus Insurance