Insurance in India is one of the last untapped bastions of financial services anywhere in the world. There is an attractive window of opportunity for companies to enter this market now to build their businesses. The market is large, over US$ 30 billion of new business at last count, growing steadily at about 8% over the past five years and underpenetrated. A deeper look into insurance is fascinating because it reveals the priceless diamonds within the already valuable rubies! Consider the P&C or general insurance space. This is a sizeable US$ 12 billion market that has grown at over 20% over the past 5 years and where penetration is one-fourth the world average. Within the general insurance segment, health insurance is bustling. It is about US$ 2 billion in premium and growing at 40% each year. Penetration is negligible.
I see five stand-out insurance opportunities. First, distribution across the industry is poor. High-cost agency and bancassurance are the norm. As regulations systematically reduce margins, there is an immediate need for efficient distribution. Customers are dissatisfied with the sales process. The market is ready for high-quality brokerages and other informed intermediaries. I am convinced that the general agency concept will dramatically change the distribution landscape. Here, high performing agents collaborate for better leverage with insurers. In several markets the general agency has pulled the rug out of traditional agency.
Second, the P&C segment is completely under-penetrated. The sector’s penetration in India is 0.7 per cent of GDP compared to the world average of 2.8 per cent. There is room for several more insurers and intermediaries. Within P&C the two most attractive segments are health and liability.
Third, the internet presents fascinating openings. Comparisons sites that are the norm in the UK are small here. The use of telematics in motor insurance is a far-way concept. Using photographs to cost-effectively assess motor damage without a surveyor is an emerging concept. Insurers have a long way to go – they are still debating whether agents should be allowed to communicate company information on social media.
Fourth, Renewals present exciting possibilities. Life insurance is grappling with poor persistency. There is an opportunity to support insurers in renewals.
Finally, there is a large business to be built in selling term insurance. This is the most economical form of life insurance. However, agents are not motivated to sell this low-value product. In the US there are several sizeable agencies selling pure term insurance. These companies, such as SelectQuote, have a business model that is purely customer-pull based. Investors can build similar models and brands in India.
The insurance sector in India is young – an infant finding its legs, a tiger-cub straining to be released from its leash. The sector opened up 13-years ago. Contrast that with the US and Europe where 100-year old institutions are the norm. An excellent way to participate in ‘Brand India’ is to enter this exciting insurance marketplace today.