India is the 11th largest insurance market worldwide, as of FY18; however, it has low penetration and density. The country’s insurance penetration rose from 3.30% in FY15 to 3.76% in FY20, but remained well below the global average of 7.23%, according to the FY21 Economic Survey report. The total gross premiums underwritten in India amounted to ~US$100 billion in FY21.
For life and non-life insurance players, India presents a massive market opportunity, with population of 1.3 billion, of which 46.9% are aged below 25 years (as per Sample Registration System 2018, prepared by the Registrar General and Census Commissioner of India); rising per capita income and an expanding middle-class population; >250 million registered vehicles, with 21.5 million new vehicles sold in FY20.
Insurtech is the term used to describe emerging technologies that have the potential to bring innovation and influence regulatory practices in the insurance market. Insurtech has emerged as a segment that can aid the insurance market and incumbents to improve distribution, insurance literacy and affordability; and therefore, ultimately increase penetration.
India has 111 insurance companies, according to India Insurtech Association's Dynamic Insurtech Map and Digital Insurer.
Insurtech refers to solutions and mechanisms that are used by insurance companies to streamline policy management, minimise costs and improve the overall customer experience. It comprises various innovative technologies—such as Big Data, Blockchain, artificial intelligence (AI), machine learning (ML) and the Internet of Things (IoT)—to collect information on consumer behaviour, broker management and provide customised products. Insurtech uses chatbots, interactive dashboards and smartphone apps to respond to real-time inquiries, detect frauds, process claims and assess risks.
For example, a claim settlement in motor insurance can be automated and digitised by uploading photographs of the accident and relevant documents to verify the claim and via online processing and approval of the claim. Also, to avoid any fraud by the client (such as repetitive claims), the insurance company uses Blockchain technology to collaborate and share data & transactions with other insurance players.
Insurtech Market Landscape: Segments
- Aggregators/Policy Management: These companies provide digital tools that enable users to search, compare and find affordable premiums from multiple carriers. These companies also assist users in in managing policies and finance premiums from a single platform.
- Online-first Insurance: These insurance providers sell their own insurance products such as life, property and casualty (P&C) and health premiums through their digital channels.
- Internet of Things (IoT): Companies use connected device (IoT) technologies, such as sensors and wearables, to identify and analyse risk to users. At present, this technology is widely used in the car insurance industry, under the usage-based or telematic insurance programme, which allows insurance companies to monitor and store driving-related data. Companies also offers custom insurance solutions for home and life insurance.
- Software/White Label/Application Programming Interface (APIs): These companies deliver software solutions to insurance companies and brokerages. They provide solutions such as risk assessment, underwriting, fraud detection, regulation, policy administration, marketing, sales, chatbots and customer relationship management (CRM) tools.
- Claims: These start-ups create platforms to digitise claim processes by developing technological solutions such as video, mobile options and self-service. These companies leverage technologies such as ML and robotics to digitise payment systems to enable customers to effortlessly complete their payments by just a click of a button.
Key Technologies Impacting the Insurance Industry
Note: *- As of October 2020
Source: India Insurtech Annual Report 2021
Insurtech Unicorns in India
With two Insurtech unicorns, India stands shoulder-to-shoulder with China, but lags behind the US that comprises six Insurtech unicorns.
Policybazaar: Founded in 2008, the company became a unicorn in 2018. It announced plans for an initial public offering (IPO) in 2021 to raise US$ 500 million and is targeting a valuation of US$ 3.5 billion.
Digit Insurance: Founded in 2016, the company became India’s first unicorn of 2021, with a valuation of US$ 1.9 billion.
In Union Budget 2021, the government increased the FDI limit in insurance from 49% to 74%.
The following announcements by Insurance Regulatory and Development Authority (IRDAI) support innovation in the industry.
The insurance sector is undergoing a transformation, with evolving client preferences and growing importance of digital services. With the power of automation, smartphone apps, advanced analytics, artificial intelligence and IoT tools, digital insurance companies are able to offer greater customer satisfaction with a small workforce. These types of lean organisations, with wider insurance coverage, are mostly likely to will gain prominence in the future insurance ecosystem.
Big technology companies are vying to become digital intermediaries in the insurance space, for example, AmazonPay has begun distributing insurance products in India, while Google and Apple are interested in insurance. Moreover, start-ups that can assist incumbents and big techs in making digital transition are likely to emerge as winners.