Page 30 - Insurance Times June 2023

Every person and business in India needs insurance. Yet growth potential for insurers in tier-2,3 and 4 cities.
for the past 21 years of liberalization, policyholders have Prosperity will grow in rural India, especially with good
been victims of this industry's little recognized economic agriculture performance. Insurers have to come up with
cycle, created by anti-competitive underwriting simple, intelligible and, at the same time, innovative
practices, unique and opaque accounting policies, and products to meet the protection needs of people.
virtually unchecked power because of the generally weak
It is time to relook the solvency norms. Like standalone
regulation of insurance rates.
health insurers there will be standalone vehicle insurance
Insurers make their money primarily from investment companies and the like. So, the solvency norms should
income, investing the premium they receive from be fixed in line with the kind of business that is being
policyholders. They invest the "float" that occurs during done.
the time between when premiums are paid to the insurer
The system of management expense ceiling should also
and losses are paid out by the insurer - e.g., there is
be reviewed and see the possibility of having an overall
about a 15-month lag in auto insurance, while there is a
ceiling on expenses. IRDAI is dealing with regulations
5- to 10- year lag in "long tail" lines like medical
which were largely framed two decades back and they
malpractice. As a corollary to this, rarely do insurers
have to be revised. Experts are frowning at IRDAI's
achieve an underwriting profit (i.e., when premiums
practice of issuing new regulations in the guise of
taken in are more than "losses" and underwriting
Guidelines which needs to be halted.
expenses. In many lines of insurance, an underwriting
profit would produce a wildly excessive overall profit While using data to improve offerings and, ultimately,
customer experience is not a new phenomenon in the
because the investment yield on the float is so great.
insurance industry, doing it well and consistently is still a
The most common story presented historically by industry
challenge for many. There are outside factors at play
leaders to argue that the industry is financially
here as well, as insurers grapple with market instability
beleaguered and cannot pay claims is that lawyers,
and increasing competition.
lawsuits, and judges have suddenly become more
"aggressive." It is a narrative used not only to push for a Need for adequate life insurance and being covered with
appropriate products, has taken leapfrog in 2022. Life
cycle turn, but also to maintain rate hikes for the entirety
of a three- to four-year hard market. insurers have to focus on simple, innovative, and
differentiated products to offer better customer
Globally, insurance firms are navigating volatile markets
experience. The focus should be on creating hyper-
of economic uncertainty. As the pandemic-induced
personalized customer-centric offerings to cater to
financial crisis persists, the future will require industry
policyholders' emerging needs.
participants to juggle with dynamic investment, business,
It has been two decades since the opening up of the
and regulatory conditions. What's being observed is that
insurance industry. While during earlier phases the
insurers and brokers who swiftly pivoted to digital
emphasis was on growth, the industry will move towards
channels enabling seamless operations experience
consolidation as it matures as companies also start
improved growth across insurance markets.
looking at profitability and not only growth numbers.
There is an increased convergence in administrative tasks
The general insurance industry being price sensitive, the
such as underwriting, processing of claims and managing
economies of scale of the players will be another
customer queries. Insurance industry should focus on the
advantage that may bolster the mergers and
elements of acronym 'Ideas'- Investment, Distribution,
acquisitions.
Economics and Efficiency; Administration and Solvency.
India is emerging as the most prominent and attractive
Despite prodding, no life insurers are coming with short-
market for the growth of Insurtech. The adoption of
term group insurance products. It is good to be risk averse.
Insurtech is anticipated to provide lucrative growth
But industry should come forward to provide risk cover.
opportunities to the health insurance market as well.
Insurers have very little to show on micro insurance and
Through the application of advanced technologies, such
more needs to be done on this front.
as cloud computing, AI, IoT, etc., insurance providers
With COVID-19 spread into the hinterland, there is huge can focus on improving user experience and overall
The Insurance Times June 2023 27