The insurance sector in India made progressive advances in the year 2023. Surrounded by a dynamic economic scenario and changing customer preferences, the sector showed resilience and adapted to new requirements. Compared to last year, general insurance and life insurance witnessed a growth of 16% and 18% respectively in 2023. The overall Indian insurance industry showcased a robust growth rate of 10.3% in FY 2022-23 despite multiple challenges. Factors that contributed to this growth include regulatory reforms and policy initiatives carried out by the Insurance Regulatory and Development Authority of India (IRDAI). Technology has been acknowledged as a driving factor for Insurance 2.0. It has become much easier for insurance companies now to launch various insurance products in a faster way. They can even tie up with multiple distribution partners.
Some reforms undertaken by IRDAI which are set to enhance accessibility, availability and affordability in insurance policies include:
Use and File method
Composite registration
All-in-one insurance policy
Value-added services by insurers
In the last two years, reforms such as an increase in FDI limits or staggered lock-in requirements have given a much-required push to the sector. New investment tools like INVITs and REITs, and alternate investment funds are available for insurers. Talking to Outlook Money Digital Sarbvir Singh, Joint Group CEO, of PolicyBazaar Fintech said, “In 2023, significant strides were made in innovation and transformation, marking it as a pivotal year. The Indian insurance industry, led by proactive initiatives from the regulator, embraced innovations placing the customer at the forefront of discussions. With a focus on seamless customer experiences, enhanced claim settlements, transparency and increased penetration, 2023 became a year of positive change.”
“Some of the thoughtful and well-aimed initiatives that the industry witnessed this year are — cashless claims in health insurance, greater focus on women customers with first-in-the-industry products such as women's term insurance, simplification of policy documents, fast-tracking of claim procedures, introduction of usage-based policies and telemedicals for NRIs. This wave of customer empowerment and industry enhancement is poised to be even bigger and stronger in 2024,” Singh said.
But there are challenges as well. The gap between urban and rural India is one challenge that remains high. While over 65 per cent of the Indian population lives in semi-urban or rural regions, the penetration of life insurance coverage is just 10 per cent while fewer than 20 per cent have health insurance coverage. The high cost of distribution and operation is another issue. Talking to Outlook Money Digital Indraneel Chatterjee, Co-founder of RenewBuy said “Low-cost insurance products should be introduced more, to tap the huge market potential in the Tier 2, 3 cities and beyond. Companies need to develop omnichannel strategies and provide access to real-time data to transform the customer service experience and improve brand loyalty. While the government pushes for ‘Insurance-for-All’, effective public-private partnerships can only enhance insurance penetration in the smaller pockets of the country.”
Overall, 2023 was a positive year for insurance as it has paved the way for innovations in the sector going forward. There is good demand for policies which are customized and flexible addressing individual needs with hyper-personalization. Technology is set to make further inroads and the role of insurtech firms in the sector will increase going forward. “InsurTech is on an unstoppable trajectory, moving towards continuous growth in future. It stands as a lighthouse within the insurance industry, anticipated to flourish into a staggering $339 billion market opportunity by 2025. Across the spectrum, from government bodies to regulatory authorities like IRDAI and both traditional and innovative insurance companies, the realization of technology's prowess within insurance has been widespread,” Chatterjee said.
“Looking ahead, 2024 is anticipated to be another chapter marked by sustained growth, with further innovations and technological advancements. Consumer inclination, improved reach & technology blend, and the emergence of the national health stack will help improve the penetration of insurance, especially in Tier 2, 3, and 4 markets. Technology will play a significant role in promoting financial inclusion, by offering affordable insurance products. There will be spurts of low-cost health insurance, which will tap more consumers in smaller cities in the coming year. There will also be significant opportunities in underwriting, distribution, automation of insurance processes, and hyper-personalization. These will also continue gaining investor attention,” Chatterjee added.
In the year 2024, the insurance industry will likely undergo further transformation — with a focus on making insurance more accessible and relevant to individuals beyond metros. “The era of Insurance 2.0 has dawned - signifying an ongoing process of continuous evolution and reinvention. A shared goal within the industry is the vision of ‘Insurance for all by 2047’, reflecting a commitment to ensuring financial security for every individual. Additionally, the industry will witness increased reliance on technology and a shift from a role-based to a principle-based operational framework, allowing for greater customisation and responsiveness to the evolving needs of policyholders,” Sarbvir Singh said.