In today’s evolving market, with the advent of many private players in the non-life space, constant revision of strategies becomes the primary requisite for any insurer. Insurance companies are bound to come up with unique propositions and customer-centric initiatives to sustain themselves in today’s fiercely competitive market and meet modern consumer’s demands.
The general insurance sector is on a steady growth trajectory as it already has over 20 major players in India, the urban market being a key contributor for the sector. The insurance companies are adopting the latest technology to service their customers in a better way, while also making them aware of their customised services and products that would prove beneficial to them in the long run. Companies are increasing their access points and distribution channels to spread awareness among people by informing them about the benefits of having an insurance policy. Apart from business generation through multiple distribution channels, companies are also adopting cutting-edge technologies like e-marketing and institutional marketing for a deeper penetration in the rural market.
The growth of the general insurance sector enormously depends on brokers and agents, who are the face of the company. Primarily, they are entrusted with the responsibility of educating the under-informed customer in risk-management and risk-improvement, accept more reasonable policy deductibles and seek better policy coverage. Hence, well-informed agents and brokers will contribute to the growth of the sector. This is one of the key areas where developments would help the industry.
Secondly, in today’s scenario technology plays a pivotal role in running a business irrespective of the sector. It not only helps a company to enhance the level of efficiency and precision, but also helps save time and manpower which in turn cut costs down considerably. Selling of insurance policies to customers through the online space, is gaining a lot of momentum in recent times. Typically, customers buy insurance policies online for products like motor, travel and health. Hence, up-gradation of technology and telecom solutions will be the foremost factor in determining the future growth of the industry.
The complex procedures involved in the settlement of claims discourages many customers from buying a general insurance policy and is a source of lack of trust for the industry in general. This poses a great challenge for the sector though a lot of players are streamlining and expediting their claim processes. Hence initiatives need to be taken to ensure that customers have a less complex and hassle-free claim settlement.
Another major challenge faced by the industry is that there is a dearth of trained insurance professionals and technicians at all levels in India. To bridge this gap, insurance companies need to urgently pick and train professionals in the best of practices that benefit the company in the long run. And last but not the least the lack of profitability poses a serious challenge to the sustainability of this sector.
The regulatory reforms that could be brought about to take the industry to the next level would include increase in FDI in this sector to 49%, allowing flexibility in policy wordings for motor & commercial lines of business, creating overall framework for product creation rather than requiring approval for product creation, and possibly changing the service tax rules for promoting micro-insurance.
The insurance regulator’s proposed revamp of bancassurance is a step in the right direction. It will give banks an opportunity to monitor insurance company service levels and ensure that its customers get the best in class general insurance products and services. Allowing banks to enter in to multiple tie-ups will facilitate greater accessibility, choice of products and services for bank customers. It will also increase insurance penetration in India as there will be better utilisation of the bank branch network. Such reforms from the regulator are the need of the hour. This is also important given the lack of awareness on the part the Indian customer about insurance products and their insurance needs.
A few second generation reforms that the industry should consider are:
- Improve insurance awareness and reach by way of promoting new cost effective distribution channels
- Identifying more and more non-government organisations, self help groups and micro-finance institutions to be included as micro-insurance agents to cater the needs of rural people
- Monitor various causes leading to the grievances of policyholders’ and take all possible steps to contain them
- Promoting insurers to offer range of policy servicing options through innovative and cost effective tools
- Separate and simpler qualifications need to be considered for intermediaries to distribute special types of products like health insurance and micro insurance
- Facilitating the industry wide data repositories in respect of various risks to enable insurers to appropriately price the respective products
- Internet and telecom based marketing of insurance products need to be encouraged
- Promote research in the area of developments in morbidity of Indian population, due to medical advancements, to facilitate more appropriate pricing of insurance products
- Encourage insurance industry to offer basic products particularly health insurance plans, which would allow portability between various insurance companies
By incorporating a few corrective measures to the existing system, the insurance industry could see far more growth and improve its contribution to the country’s GDP (gross domestic product). Should encourage industry entities like Life Insurance Council and General Insurance Council to take active part in improving market conduct and service standards. The industry should place greater emphasis on incentives for insurers as an effort in this direction. Consequently lay more emphasis on corporate governance which recognises and protects rights of all interested parties, develop separate set of regulations for reinsurance companies and encourage health and reinsurance market in India will result in positive outcome. Also facilitating securitisation of insurance products, enabling the availability of additional capital to insurance companies and ensuring sufficient flexibility in the regulatory framework to sequence market opening would help as well. Lastly, the industry must prioritise financial reforms over financial liberalisation.
The author is the CEO & MD of Bharti AXA General Insurance
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