Growth, Innovation, And Challenges: A Glimpse Into India’s InsurTech Landscape

In the dynamic landscape of insurance, the year 2024 is shaping up to bring transformative change in India. Backed by an optimistic economic scenario, evolving customer preferences and support from regulators, this sector displayed resilience and adapted to new requirements in recent years. 

However, the insurance penetration levels of our country remain low, currently at 4.2% compared to the global average of 7 to 8%. To address this gap, there is a pressing need for the industry to focus on increasing insurance penetration. 

While growth has been observed in existing channels of insurance sales, new avenues are emerging. Traditionally, agents visited homes and engaged with families to discuss insurance, while bank employees introduced insurance during banking transactions. 

This landscape shifted with the privatisation of the insurance industry, leading to the establishment of private insurers’ offices. This diversification of sales channels underscores the industry’s dynamic evolution and the ongoing efforts to enhance accessibility and awareness.

Embracing Technology And Customer-Centric Strategies

Insurers are now navigating this journey and transitioning from a push marketing approach to a centred approach attracting consumers through compelling value propositions. India’s InsurTech sector is expected to grow by 17% annually to reach $307 Bn by 2030. 

The country is pivoting towards a transformative shift and witnessing a heightened awareness of financial security, with increasing acceptance of insurance products, supported by regulators and government schemes, leading to a surge in new entrants and contributing to economic growth. 

Focusing on automation to improve profitability is a very efficient way to attract new partnerships with InsurTechs. Technology plays a pivotal role in this transformation, with customised or ‘sachet’ products enhancing financial literacy and driving increased insurance penetration. 

Artificial intelligence and machine learning systems are key drivers, enabling swift damage assessment, policy coverage verification, and expedited claims processing. This technological integration significantly enhances the overall customer experience, elevating the quality of interactions between customers and insurance brands.

Expanding Horizons: The Rise Of Innovative Distribution Channels 

In the dynamic landscape of insurance, the emergence of innovative distribution channels is reshaping the industry’s approach to reaching consumers. Key channels leading this transformation currently are:

Contextual Insurance

Today, the landscape of insurance has evolved beyond conventional domains like life, health, property, motor, and jewellery. Now, it extends to a diverse array of products and services, offering ‘contextual insurance’ that adapts to various situations. 

This type of coverage is often integrated into specific products, services, and experiences, catering to the evolving preferences of millennials and younger consumers who engage in travel, leisure, technology, lifestyle purchases, and new experiences. 

Utilising small-sized insurance policies becomes a prudent approach to address potential risks in these contexts. 

Embedded Insurance

Embedded insurance seamlessly integrates with non-financial products and services, offering convenience and accessibility. It is poised to disrupt traditional distribution channels, fostering new collaborations between insurers and non-financial companies. 

The traditional one-size-fits-all insurance model is giving way to more dynamic and flexible approaches. Usage-Based Insurance (UBI), especially in auto insurance, is gaining momentum. 

Insurers leverage telematics devices to monitor driving behaviour, offering lower premiums to safe drivers, marking a significant departure from the conventional insurance landscape.

Bancassurance

This is yet another model that will come to the fore, wherein consumers will be offered banking and insurance services under one umbrella with the banks providing insurance products and services on the latter’s behalf. 

Banks present a very cost-effective, nationwide distribution channel for insurers, capable of reaching markets where the latter have little or no presence. Like with insurance, the key to the success of Bancassurance lies in employing the omnichannel model and offering personalised offerings and high-quality customer experiences. 

The omnichannel aspect is important because customers expect flexibility, ease of use, and continuity in their interactions with a product or service. InsurTech helps banks and insurers co-create digital insurance platforms that enable a transparent, hassle-free buying process. 

Integrating Sustainable Solutions 

Amidst the ever-sharpening focus on environmental, social, and governance (ESG) aspects of business, insurers need to be mindful of the ramifications of their investment and underwriting decisions. 

It is advisable – perhaps necessary – for insurers to implement decarbonisation measures across their value chain and rethink their business strategies concerning climate coverage and risk management. 

Technology can be immensely useful on this front, enabling the creation of platforms where climate risk-related data can be stored, monitored, and analysed to aid ESG reporting. 

AI and ML can help with identifying, quantifying, and limiting climate risk in existing portfolios, and avoiding such exposures in the future. It wouldn’t be surprising if insurers were to incentivise the use of climate-resilient materials among policyholders.

Roadmap To Growth

2024 is set for a growth curve. Both insurance and insurtech will grow strongly on the back of a growing realisation of the need for financial security; attractive government schemes for the masses; and regulations that allow the entry of even small or niche players. 

Earlier this year, the IMF had described India as a ‘bright spot’ in contrast to the tepid global economic growth. Insurance can be one of the important enablers of India’s socio-economic development in the coming years. 

As large numbers of consumers take to insurance – many of them for the first time – this impact will slowly become evident. Families will be better protected, businesses will be more confident, and communities will be more resilient even amidst uncertain times.

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