 "Insurance Amendment Act to boost growth, promote inclusion: Insurance CEOs")
It has been a quarter of a century since the insurance industry was liberalised. At the ‘Business Standard BFSI Insight Summit, 2024’, Alok Rungta, managing director and chief executive officer (MD & CEO) of Future Generali India Life Insurance, Sharad Mathur, MD & CEO of Universal Sompo General Insurance, Sumit Bohra, president of IBAI and CEO of GlobeSecure Insurance Brokers, and Mayank Bathwal, CEO of Aditya Birla Health Insurance, discussed what is next for the industry. Edited excerpts:
What kind of changes are you seeing from the Insurance Amendment Act?
Rungta: So there are a lot of things which the industry is expecting and I think it is expecting across the board. One is 100 per cent foreign direct investment (FDI) which people believe is going to be a growth-propeller in the way more and more participation of more insurers can be brought to the country. Even today in 25 years, there are only a handful of insurers in the country.
When you look at more developed nations, say for example the US and all, there are thousands of insurers. One of the drivers could be 100 per cent FDI where people want to come on their own. This is a long-term business, sometimes there are challenges on how many domestic participants you can get to participate in one industry. Today, still there is a requirement that at least a domestic player has to have a 26 per cent stake. I think that’s a big one which the industry is expecting which will bring more competition, and I think competition always helps. Second, there is a lot of talk on this composite licence which is happening across the board. I think these two are the big ones.
Mathur: Our government and insurance regulator are very progressive and we have witnessed that the regulator in the recent past has become more of a developer, not just messaging but also being cascaded by the government to reach the last mile to achieve insurance inclusion. I am very hopeful and sort of expecting myself as part of the insurance fraternity that there will be times – and soon – where we will witness things like mono-line insurers or sectoral insurers, and that is possible if we have flexibility, liberty given to these investors. It could be international players in the insurance sector, institutional investors, private equity firms which would like to operate at a low scale. So all (existing life and non-life insurance players) put together are not sufficient or enough to reach out to the entire population. So I am very gung-ho on the kind of insurance scope from the insurance companies setting up shop is going to get widened.
Bohra: From our perspective, perpetual licence is what we are looking for. In our case the licence has to be renewed every three years. So that is a process and probably the business continuity is being hampered because of the process. So, probably if this goes through, the distribution will get a new flip and a lot of investment which would come into the broking segment as well. Obviously my colleagues have already discussed both the aspects in terms of 100 per cent FDI and different insurance companies. I feel that is also very important. Probably people are not able to reach certain segments. The current insurers are not able to reach there. If you divide the demography and understand which state has which kind of motor cars and if you just tap that market, I think there is tremendous potential even in that market as well.
What kind of value added services life insurance players are looking at?
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Rungta: The customer orientation is more about living benefits. For example, if I can sell someone an annual medical check-up. It’s a great solution to give because the guy is interested in his own life. Now, you can do these kinds of different propositions based on what kind of solutions you are offering to a customer and that’s where I believe the engagement has to be higher rather than making a transaction. Today it is a transaction, it is not an engagement. That is where the customer experience also changes. See there are only four steps if you ask me in the life cycle of a customer. I buy, I renew, I transact because there are some changes in my record or I claim. So these are the four transactions which happen. Otherwise there is no engagement. Then we see the entire customer experience and the moment of truth is beyond these three or four. I am selling a portion of the financial literacy segment. I'm not selling the holistic value. Then the capital requirement, the way you monitor and run that business could be very different. And these are models which are prevalent already. So we can learn from this because when you want to penetrate in a particular segment. It could be a customer segment, geographical segment, or you want to give an umbrella solution across encompassing. You can do all those things. If you give the flexibility from a capital, risk management, and accordingly licence. Financial inclusion has happened because you have structured it differently. The way you manage these companies are different. Structured licensing policy: Regulator is heading towards that. That is what will help, I think, penetration and insurance for all.
Mathur: In mature markets, value-added services are considered part of the insurance product, often referred to as ecosystem services. For example, motor insurance could offer more comprehensive roadside assistance in collaboration with auto manufacturers. In health insurance, wearable devices that monitor blood pressure or diabetes encourage healthier lifestyles...helping insurers reduce loss ratios by promoting daily health monitoring. However, these services are not yet uniform or regulated. Once formalised, they will expand the insurance ecosystem, making it more inclusive and meaningful to consumers. Those who may not see the immediate value in purchasing insurance could find greater relevance in the ecosystem services attached to it. By integrating these services with insurance, insurers can create flexibility and reach underserved populations, promoting insurance inclusion.
How does ‘Bima Sugam’ change dynamics for the insurance brokers?
Bohra: Four years back I was talking to the regulator that there are almost 708 brokers. There are very few brokers who have the platform where a comparison could be drawn, and the rest of the brokers do it manually. For a manual broker you may need a day to give you a comparative code between a health or a motor (policy). Which obviously from a customer's perspective he would think that you probably know you are too lazy. Or you are not being able to perform your duties. But unfortunately that platform with brokers is not there. The amount of money which requires to be spent on that platform is not feasible for all the brokers. So a unified platform like Bima Sugam is very much required. It is required (because) the broker’s role is not only code comparison. Our role is basically more of an advisory and to make sure that transaction happens. Rest is IT enablement. I think this is a very important piece of element which will enable all intermediaries. To make sure that you know proper comparison is drawn and the customer gets the right product by distinguishing the products.
What do you think is the main reason behind lower retail health insurance penetration and what are the steps that can be taken to address the issue?
Bathwal: I believe we need to first understand the big picture before seeking a solution. India’s population of around 1.40 crore (1.4 billion) is divided into segments, with the bottom 60 crore (600 million) covered by the Ayushman Bharat scheme. The government is extending this coverage, especially to senior citizens, as they can't afford the cost of universal health care. This is part of the government's ambition for universal health coverage but financing it remains a challenge. The remaining 80 crore (800 million) includes two key groups: The top 35-40 crore (350-450 million), which the private sector focuses on, and the missing middle, a group of about 40 crore (400 million) who don’t fit into either of the top or bottom segments. To address the missing middle, the key challenge is affordability. Many in this group earn less than Rs 3 lakh per household and can’t afford health insurance premiums of Rs 10,000-15,000. To make health insurance accessible, we need to find solutions that reduce both health care and distribution costs. One potential solution could be Bima Sugam, which may help reduce distribution costs. Additionally, if the government follows through on its proposal to reduce or eliminate GST on health insurance, it could lower the overall cost.
Mathur: Affordability is a significant concern, especially for underprivileged people in remote areas compared to metro and mini-metro regions. To address this, we’ve seen the introduction of various health insurance products like low sum insured plans and benefit-based products, as a one-size-fits-all approach doesn’t work for all categories. In Tier-III, -IV and -V locations, health insurance uptake is increasing. By tailoring insurance products for these regions, such as disease-specific plans like a dengue insurance product, we can achieve two goals: Insurance inclusion and maintaining low loss ratios.
Surrender value norms: That's a hot topic in life insurance. What impact do you see?
Rungta: In the last 25 years, the industry has become robust in adapting to various shifts. The latest change, special surrender value, has been well received despite short-term challenges. Although there was a need for product redesign and adjustments in distribution, the industry has managed these changes. The regulator's pace of change has been faster than the industry's ability to keep up but overall the market has adapted well. While some segments face income loss, the customer-centric approach benefits consumers in the long run.