Global context
• Following a slowdown in business due to COVID-19 in 2020, the insurance industry registered a rebound in
premiums written in real terms in 2021
• Insurers faced further challenges in 2022, with inflation rising, fueled by Russia’s large-scale
aggression against Ukraine ( US$35b estimated claim as per an EY report)
Context
• The huge protection gap for climate and cyber risks, and the shortfalls in health insurance and retirement
savings, present a compelling opportunity for the industry.
• The path to growth starts with new solutions and business models that build on fundamental protections to
deliver more value toRisk
customers.
profiling | Identifying hotspots | Incentivized
safety
Insurance penetration:
• Is 3.71 % in India (2.74 % in life and 0.97 in non-life). The comparative figures for Thailand, Malaysia
and China are 5.56, 4,84 and 4.32.
• In India it was 2.71 % in 2001, 5.20 in 2009 (highest). The penetration of life segment is falling from
Metrics
3.4 % in 2011, where as non-life segment has grown from 0.70 %.
Insurance density:
• Is US$ 74 (US$ 55 for life and US$ 19 for non-life) in India. The comparative figures for Thailand,
Malaysia and China are US$ 385, US$ 518 & US$ 406 respectively
• Premium growth: Rebounded post covid-19 i.e after 2020 (Majority of growth in life-insurance: 7.7%,
moderate growth in non-life: 2.5%)
• Investment allocation and performance: Rising inflation in 2021 led to unrealized losses in some
Parameters government bonds (50 % avg. contribution) held in insurer’s portfolio and experienced lower performance
despite buoyant stock market. Further in 2022, they even diversified their investment
• Profitability: Declined due to lower investment returns and lower underwriting gains mostly due to claims
payment increase in non-life segment
External environment scanning
Political forces
Key factors Opportunities Threats
- Opportunities for private insurance
- Pricing and Profitability Pressure
Divestment of LIC in 2020 companies to gain market share and
compete on a level playing field
Rising political risk
- Political risk insurance as a product - Political violence losses due to
will see larger subscription opening civil unrest: damaged properties/
new business opportunities loss of life/ business interruptions
Source: Bajaj
Allianz
Increased FDI limit in insurance from - High competition from international
- Fueling more innovation
49% to 74% since 2021 player
Government’s provision of tax rebates
and schemes to general public
- It will be desirable that insurance
(Life insurance policies with an - Insurance penetration for rural
businesses be allowed to carry
aggregate premium up to Rs. 5 lakh (US$ population
forward and set off business losses
6,075) will be exempt from taxation –
for an indefinite period
Union budget 2023-24)
External environment scanning
Economical
Key driving forces Opportunities Threats
- Improvement in distribution
capabilities, along with substantial
- Intensive competition leading to lower
Greater private sector participation improvements in operational
premium rates
efficiencies
- Opening new opportunities to invest
- Fluctuations in interest rates affect
Interest rates fluctuation in India in and diversity their portfolio and
investment returns and profitability
FY2022 reduce dependence on Fixed income
for insurance companies
securities and public bonds
External environment scanning
Social
Key driving forces Opportunities Threats
- Increased Demand for Health Insurance
The recent pandemic has emphasized the
- Collaborations with Healthcare - Growing health risk can lead to high
importance of healthcare on the economy
Providers to offer value-added claim payment and loss ratios
services and enhanced healthcare
(Insurance market growing at a rate of - New entrants and existing players may
benefits to policyholders
32-34% each year) offer attractive products and pricing
- Health Tech Integration to incentivize
fitness
- By 2030, India will add 140 Mn middle- - The Insurers may face challenges in
income and 21 Mn high-income striking the right balance between
Wide middle class expansion households which will drive the demand offering affordable premiums and
and growth of Indian insurance sector maintaining profitability for price-
sensitive middle class
- The youth population is more digitally
- Young individuals doesn't realize or
savvy Insurers can leverage this by
feel the importance and necessity of
providing user-friendly digital
Rising youth in population health insurance as they are at a
platforms and mobile applications for
lower health risk – this can lead to
purchasing insurance and managing
lower growth rate
policies
External environment scanning
Technological
Key driving forces Opportunities Threats
Robotic Process Automation (RPA) , IoT - Bots will become mainstream in both - Resistance from insurance agent
and AI will occupy center stage in the front and back-office to automate against their share of business
insurance policy servicing and claims management becoming extinct since it is largely
(Driven by newer data channels, better for faster and more personalized dominated by corporate agents,
data processing capabilities and customer service offline brokers or banks
advancements in AI algorithms)
Rapid digitization and filling digital
gap - Possible for consumers to buy
insurance through multiple - Insurance companies as well as
(Customers are now starting to prefer distribution channels insurance holders are more prone to
digital modes for their insurance needs - Easy reach by corporates to the frauds and cyber risk
- 73%/62% of customers preferred the general public even without agents
online mode for GI/HI products (2020))
Lot of brokerage platforms with
- Expanded Market Reach - Data Security and Privacy Concerns due
technological innovations reaching
consumers - Diversification of Investment to the intermediary
Products: e.g., thematic portfolios - Intense Competition: customers exposed
(The share of weB-aggregators within to all present players and will be
- Cost effective operation due to
digital insurance has been increasing, driven by low premium options,
elimination of multiple distribution
now accounting for ~30%+ of digital ignoring inherent benefits
channel
insurance origination )
External environment scanning
Environmental
Key driving forces Opportunities Threats
- Increased Demand for Insurance
- Increased Claims Frequency and
Coverage
Severity leading to lower
- Insurers can provide risk assessment profitability of insurers
services that can help identify
- Notorious policies by insurers to
Vulnerability to natural disasters potential risks and offer risk
avoid claim settlements
mitigation strategies, making
insurance companies valuable partners - Increased regulatory scrutiny of
in disaster preparedness insurers to assess their capacity of
covering the indemnity
- Growth in re-insurance market
- Rising climate-related risks may
result in higher claims payouts,
- Sustainable and green insurance impacting insurers' financial
Climate risk and introduction of stability
initiatives can attract
climate-related insurance products
environmentally conscious customers - Inadequate risk assessment and pricing
for climate-related events can lead to
underwriting losses
External environment scanning
Legal
Key driving forces Opportunities Threats
- Without the strict oversight of IRDAI,
there is a possibility that some
- Freedom to innovate and increased
Insurers can now launch new health insurers might launch subpar or
flexibility can lead to a diverse
insurance products without IRDAI’s nod. unsuitable health insurance products
range of coverage options, catering to
(Earlier the flexibility was given for various demographics and health - The freedom to launch products without
group insurance products but now retail requirements prior regulatory approval might lead
products have also come under the new to aggressive marketing tactics and
- Faster Go-to-Market
norms) the promotion of complex or misleading
insurance policies.
- Potential Market Saturation
- BFSI companies' stocks and assets can
be subject to market fluctuations and
- Diversified portfolio, better risk
IRDAI hiked maximum investment limit of economic conditions.
management
insurers in banking, financial services
- Increased exposure to the BFSI sector
and insurance (BFSI) companies to 30% of - Higher potential returns
can expose insurers to higher market
their assets from 25%
volatility.
Administrative ministry and Gov. policy
Department of Financial Services
• Eased product approval norms
• Increased FDI % for global insurers, 74% from 2021
• Corporatization of public insurance corporation – to increase consumer choice and lower premium
• More emphasis on Insurance Ombudsman Rules for better resolution of policyholders’ complaints regarding
insurance service deficiencies
• Push on Insurance companies for issuance of Digital Insurance Policies via DigiLocker
• The Union Budget 2023-24 has proposed to limit the income tax exemption on the proceeds of high value
life insurance policies
IRDAI: Insurance Regulatory and Development Authority of India
• Insurance for all by 2047’, with aggressive plans to address the industry’s challenges – bolstering ease
of doing business and making the sector investment friendly
• Boosted insurance penetration by permitting insurers to conduct video-based KYC - launching standardized
insurance products and allowing insurers to offer rewards for low-risk behavior
• IRDAI constituted a working group on standardization of Cyber Liability Insurance – new segment
proliferation
• Launched “Bima Sugam”, a digital platform for insurance product - empowering all insurance stakeholders
and cater to all insurance needs under one roof
• IRDAI regulations provide certain minimum business to be done in rural areas
Structure
IRDAI is responsible for regulating, promoting and ensuring orderly growth of the insurance and re -insurance
business in India
Source: IRDAI
Connected sectors
Banks, NBFCs Banks offering insurance products and insurance companies collaborating with banks to provide
and comprehensive financial services
Financial
services
Health insurance products, which offer coverage for medical expenses, hospitalization, and
Healthcare other healthcare services
Automotive Mandatory insurance requirement being a legal requirement to protect against third-party
and liability and property damage
Transportati
on
References
https://www.businesstoday.in/union-budget-2022/opinion/story/budget-2022-what-the-insurance-sector-expects-from-govt-319886-
2022-01-21
https://www.oecd.org/finance/globalinsurancemarkettrends.htm
https://www.ey.com/en_gl/insurance/global-insurance-industry-trends
https://www.livemint.com/insurance/news/irdai-allows-insurance-companies-to-invest-up-to-30-of-assets-in-bfsi-sector-
11651294465961.html
https://www.investindia.gov.in/sector/bfsi-insurance
https://www.ibef.org/industry/insurance-sector-india
