 "BS BFSI Summit: General insurance companies see signs of growth revival")
The penetration of general insurance products like health, motor and property remains low in the country but there are early signs of a growth revival in the industry and beginning of expansion of the market, according to top CEOs (chief executive officers) of general insurance companies.
Speaking at the Business Standard BFSI Insight Summit, the heads of some of the largest general insurance companies said that they faced many growth challenges in recent years but the industry is on the cusp of a new phase of growth and expansion. This will help the industry realise the government and the Insurance Regulatory and Development Authority of India (Irdai)’s vision of “insurance for all by 2047”, when India is expected to be a developed country.
“Low penetration of insurance products such as health and motor is an issue but green shoots are clearly visible now. Various insurance companies have already begun to make fresh investments, open offices at newer centres, and recruit new distributors. The groundwork has been done and it will start to show up in policy sales and penetration data soon,” said Anuj Tyagi, MD & CEO of HDFC Ergo General Insurance Company.
According to Irdai data, the premium to gross domestic product (GDP) ratio for the general insurance sector has been stagnant at around 1 per cent for some years now, which has raised concern in the industry regulator and the government.
Tyagi added that growth in policies and penetration is being aided by regulatory moves such as Vima Vahak, Vima Vistar, and Vima Sugam.
“We now have regulatory freedom to launch bespoke products, a new distribution framework is in place, and every insurance company has been allotted specific states in the country to drive growth and penetration of insurance products. This will kick off the new phase of growth,” said Tyagi.
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Anup Rau, managing director (MD) of Future Generali India Insurance Company, said that the premium to GDP ratio doesn’t provide a full picture of the insurance penetration in the country. “Between 2014 and 2013, India’s population grew by around 11 per cent but the number of new policies sold tripled during the period. However, in the last seven years, the average ticket size grew by only 1.3 per cent per annum, adversely impacting premium to GDP ratio,” he said.
According to Rau, the more relevant number is policy cover. It has grown at a faster rate than premium, given the growth in new policies.
“Average premium per policy in motor insurance has not gone up in years while it has declined in case of crop insurance even as the number of policies continued to grow,” said Rau.
Aminesh Das, MD & CEO of Acko General Insurance, said that general insurance is in a catch-up game with more mature industries like banking and telecom. “In the era of digital distribution, the insurance industry is catching up with early movers such as banking and telecom. Digital innovation in the industry is now happening at a rapid pace and this will help us attract millennials in a big way, driving the regulator’s vision of ‘insurance for all by 2047’,” he said.
Industry leaders said that affordability of health insurance is also an issue and it can be partly mitigated through a reduction in goods & services tax (GST). “A lower rate of GST on health insurance premiums will directly lower their cost and make them more affordable, and expand the market,” said Tyagi.
Rau said health insurance premium in India is already one of the lowest, reducing the scope for further decline. “Reducing GST on insurance is a better option to drive penetration, compared to government using tax revenues to subsidise insurance premium in a bid to grow penetration,” he said.
Industry CEOs also said that the new wave of growth will kick in when insurance companies start launching value-added services. “Value-added services will increase brand engagement with the customer, leading to stickiness and making it easier for us to sell new products to them,” said Das.
Tyagi said property insurance – one of the least penetrated products in the industry – is likely to gain the most from bundling of insurance with value-added services.
Industry leaders also touched upon the subject of claim settlement but said that low claim ratio is largely a perception issue rather than a fact. “The industry settled nearly Rs 25,000 crore of claims during the pandemic and saved millions of families from financial ruin, but we got a bad name simply because we declined a handful of claims,” said Tyagi.
Rau said, “How can we have a low claim ratio when the loss ratio for the health insurance industry is more than 100 per cent? Settling claims is the core of our job and there’s no compromise there. However, the industry needs to improve the underwriting and onboarding process of new customers, so that fewer questions are asked during claim settlement.”