Page 16 - India Insurance Report 2023- BIMTECH

4 India Insurance Report - Series II

1.5. ESG

Environment degradation, social disquiet and governance misdemeanours are adding new dimensions
to the risks in financial markets and enhancing unpredictability. In fact, inequality and threatened
habitability have posed a question mark on capitalism itself. The growing focus on ESG will sustainably
alter the financial market design in uncertain ways. Separation of management with ownership gave rise
to Agency problem. Jenson and Mocking stated that Principal - Agency relationship is the core problem
of governance as fiduciary absolutism has come to dominate the firms. Fiduciary absolutism maximises
‘Profit Motive’ as against ‘Maximising Profit’

2. Factors Reshaping the Insurance Industry

The insurance industry globally and in India is being challenged by emerging Macro as well as
Micro trends. Let’s take helicopter view.

A. Macro-Trends

 Individualism + Information democratisation - The ‘Me’ factor, coupled with digitally connected
informed social order, and rising incomes, are heightening customer aspirations. The divergence of
choices-product, quality, pricing and delivery of services is rendering the ‘Commodification’ of the
insurance products complex and building severe pricing pressures.

 Divergent economic growth - Some economies are growing; some are stagnating, while some others
are poised for recession. Whereas currently Indian economy is on a strong wicket, the global economic
scenario may influence its trajectory in unpredictable ways.

 Demographic Disruptions - The declining birth rate and growing longevity across geographies are
going to alter the structure of the life insurance industry, in particular. Though India has become the
most populous country, it has already hit the replacement level, and ageing is discernible. Inadequacies
of state-sponsored social welfare benefits and increasing cost of wellbeing with growing longevity is
going to transform the product basket.

 The Complexity of risk - Environmental degradation, climate disasters, changing economic order,
fitful geopolitics, reconfigured life styles and shifting values are multiplying the complexity of risk.

B. Micro-Trends

The customer is on the wheels now. He is driving the industry to pronounce the ‘value preposition’
and deliver ‘customisation’. Micro-systems concepts are taking root for analysing and managing risks.
Wearables are being used to track real-time data to assess and involve customers in self-monitoring risks
for personal insurances like health, household, and motor. Infact, InsurTech is comprehensively
transforming the business and revenue models of insurance companies on a continuing basis. It is being