India’s InsurTech industry has a tremendous opportunity to not only help itself grow and scale up but also the global community
Mayank Gupta,Co-Founder and COO, Zopper
In recent years, the rise of India’s insurance sector is witnessing unprecedented transformation, particularly with the emergence of InsurTechs. Notably, India’s insurance sector is pegged to grow at 17% annually to reach $307 billion by 2030, as per a report by Inc42 Media.
Technology has played a pivotal role in catalysing the growth of personalised offerings and innovative solutions in this sector. Notably, there are other key drivers as well.
According to Invest India’s sector analysis forecast, India’s ‘demographic dividend’ will also be a growth driver for the insurance industry. Around 68% of the country’s population is young and 55% falls into the age group of 20 years to 59 years, which is characterised as the ‘working population.’
By 2025, this segment is pegged to reach 56% of the total population. This points towards the emergence of a young, tech-savvy insurable population in India.
Overview of the Indian Insurance Sector
The overall growth of the insurance sector is further propelled by highly supportive regulatory policies as part of the IRDAI’s long-term vision of fulfilling ‘Insurance for All by 2047’. This initiative is expected to bolster investor confidence and ease of doing business, besides leading to a significant increase in insurance penetration across the country.
In April 2023, a Market Intelligence report by the International Trade Administration (ITA) pegged India’s InsurTech market opportunity at US$339 billion by 2025. Indian InsurTech companies raised US$800 million in equity funding in 2021, ETBFSI reported. This is higher than the combined funding received in 2019 (US$380 million) and 2020 (US$290 million).
Consumer preference for contextual and embedded offerings, improved digital processes and incorporation of the national health stack have helped drive insurance penetration. Recent regulatory shifts in India’s insurance sector triggered a new impetus for InsurTechs to flourish.
Research insights published by PGA Labs in November 2022 indicate that B2C fundraising by Indian InsurTechs has risen and 2021 is termed as a ‘watershed’ year. It observes that most funding received by Indian InsurTechs has been for sales and distribution, with product development now gaining traction.
According to the report, business models and digital-first insurers are valued higher by investors, whereas B2B2C marketplace models demonstrate lower revenue.
In India, the health insurance industry indicated a growth of 26.3% in FY22, thereby emerging as the largest non-life insurance sub-segment with a market share of 36%, followed by the motor insurance segment at 32%, according to Invest India’s sector analysis forecast report. Fire and other segments also reported a positive growth of 7.1% and 1.1% in FY 22.
Further, a report by ITC Asia shares an observation by a GlobalData insurance analyst that India’s general insurance sector witnessed higher growth of InsurTechs over life insurance in 2021, with renewed focus on the retail segment.
Making Insurance Instantly Accessible, Affordable and Easier to Understand
For InsurTechs in India to gain stronger momentum, insurance products need to be more relevant, affordable, easy to access and far easier to understand. There is also a high expectation for a seamless, frictionless experience as consumers demand more contextual offerings to facilitate their decision making.
A proper understanding of consumer demographics, lifestyles, spending patterns and medical details helps InsurTechs to assess risk and define precise premiums for their policies. Accurate premiums and personalised solutions offer an enhanced customer experience.
Gone are the days when insurance products were perceived as complicated and varied opinions were sought to understand the finer nuances. Indian consumers evolving to a tech-savvy lifestyle prefer instant, easy-to-consume embedded and bite-sized solutions that combine personalised recommendations spanning relevant points of sale. Customers now expect real-time responses, instant access and immediate action at digital gateways.
Nowadays, people prefer the omnichannel approach as well, which brings digitisation back into the spotlight as it is critical for enabling faster and relevant decision making. This is in sync with their unique spending patterns and functions as an extension of their lifestyles.
Enormous Potential for Profitability and Industry Collaborations
India’s InsurTech industry has a tremendous opportunity to not only help itself grow and scale up but also the global community. While industry stakeholders are stepping up their focus on digital offerings, there is tremendous potential to roll out innovative offerings. There is room for multiple collaborations for insurers to scale up investments in this sector.
Given that the main purpose of insurance is to settle claims and bolster financial resilience, the emergence of new technologies enables a completely new approach to the existing business model. New pricing models are based on new value mechanisms that come with personalised and bite-sized recommendations across digital gateways.
Technology has made it easier for InsurTechs to offer bite-sized and contextual solutions. We are gearing up for scenarios where embedded insurance becomes a norm and parametric insurance concepts are integrated seamlessly. Clearly, the most successful InsurTechs will likely be those who embrace innovative solutions with a growth-centric mindset.
Enhanced focus on enabling smooth customer experiences will witness lasting results in establishing trust and transparency. The benefits of product innovations in the InsurTech segment will offer real-time personalised solutions, prompt resolution of claims and hassle-free settlement process, digital issuance of policy sans physical touchpoints, bite sized solutions at digital gateways and more.
By collecting, analysing and studying data on shared consumer behaviour, InsurTechs can offer better contextual and embedded solutions even before a claim occurs. Also, the focus is currently on prevention strategies that are incorporated into consumer lifestyle choices. This further helps InsurTechs to establish transparency and win trust with consumers.
However, this notable shift is not without its own set of challenges. There is a chasm when we examine distribution and coverage in rural segments. Making insurance easily accessible to the underserved segments or those who live in rural areas, are viewed as high-impact opportunities. By offering easy-to-consume, affordable bite-sized solutions, technology can be an effective enabler to make insurable what was earlier deemed to be uninsurable. This benefits all market participants and cost-conscious consumers.
In this context, parametric insurance is relevant as it serves to bridge the protection gap, covers general and climate-related risks that are important to rural India, thereby providing easily accessible and affordable coverage.
We already know there is a fast growing consumer preference for contextual embedded solutions across diverse digital touchpoints including health, travel and retail apps. This marks a significant opportunity to innovate and collaborate in the insurance ecosystem. This further broadens the scope for building new products and services, with a renewed focus on personalisation.
Notably, InsurTechs offer clear value propositions to incumbent insurers as well as potential customers by providing all offerings at one place, which helps consumers compare options and make better informed choices, which increases trust and transparency.
For instance, a travel cover is offered right at the time when the consumer is buying a flight ticket online or real-time protection is offered on the purchase of smartphones or household appliances, etc.
Nurturing the right decision making mindframe and preparing the consumer to make a real-time, well-informed decision ahead of any experience or lifestyle choice they are undertaking can evolve into a new sustainable habit that is secured at every digital touchpoint.
From a consumer’s perspective, this marks a win-win scenario as this type of cover is easy to understand and directly relevant to their journey and more importantly it is offered exactly when they need it. Increasingly, Indian consumers today expect a personalised experience across digital touchpoints similar to that offered by Uber or Amazon.
Simply put, technologies such as AI are being applied to assist customers or offer contextual solutions in a way that supports the customer to make real-time decisions.
By connecting data with personalised embedded recommendations at relevant digital gateways, intelligent networks are impactfully triggered along the entire value chain that involves collaboration with other stakeholders in the insurance ecosystem.
Final Thoughts
Currently, India is the fifth largest economy in the world, having overtaken the UK in 2022. Brisk digital transformation is expected to elevate India’s economy to the third place by 2030, thus ranking behind only the US and China, and overtaking Germany and Japan, according to S&P Global Market Intelligence in their latest October 2023 report.
Following two years of rapid economic growth in 2021 and 2022, India’s economy has maintained robust growth throughout the 2023 calendar year, the S&P Global Market Intelligence has observed.
A compelling economic indicator for India is its large, fast-growing middle class segment, which is accelerating consumer spending in e-commerce, retail, healthcare, hospitality and travel, among others.
A brief snapshot of Invest India’s sector analysis forecasts that India will add around 140 million middle-income and 21 million high-income households by 2030, which will further boost the demand and growth of the Indian insurance sector.
With the rise of InsurTechs, India’s insurance sector holds promise for the economy as it heralds a transformative journey of demonstrating financial resilience through technology.
In the coming years, Indian InsurTechs are poised to focus on innovating and streamlining digital processes. In addition, they are leveraging data and decoding consumer behaviour to understand emerging customer needs and identify risks. Enablers such as the National Health stack and the regulatory sandbox have provided a robust innovation-centric platform across the value chain.
Indian Insurers and InsurTechs will continue collaborating closely with regulatory bodies and government agencies to strengthen various insurance-related initiatives. Digital distribution channels are likely to register significant growth, as they are making it easier for consumers to purchase insurance online.
Rather than rolling out reactive outputs, we believe in building a trustworthy safety net for consumers and industry stakeholders through a disciplined and planned approach while innovating for their well-being and bright future.
Data Sources:
India Set To Be World’s Third Largest Economy
How India’s InsurTechs are aiming to bridge the gap
India Set To Overtake Japan as Third Largest Economy by 2030
Market Intelligence: India Insurance Sector
India’s InsurTech Moment
PGA Labs: Insurance and InsurTech Landscape
How Indian InsurTech Sector is Poised for Greater Growth
The InsurTech Revolution: India’s Leap From Legacy Systems To Digital Domination
BFSI Insurance