Page 6 - Life Insurance Today July - December 2020

The industry's capital position means it should be able to remain buoyant in the months ahead. The data for the coming
handle the COVID-19 shock. The corona virus shock will likely months will give a better sense of how quickly the Indian
accelerate other paradigm shifts too, such as a restructuring Insurance Industry can be expected to get back on track.
of global supply chains to mitigate future business disruption
risks, giving rise to new premium pools in property, Economic Impact
engineering and surety insurance. Until before the The country-wide lockdown that lasted for over two months
pandemic, the insurance industry was on track for a strong added pressure on the economy that was already showing
year in FY20.
signs of slowing down. Indian economy is now expected to
grow at 1.63% in the financial year 2020-21, as compared
Despite the implementation of essential services status, to the pre- COVID estimate of 6.4%. The slowdown in the
which allowed insurance companies to continue functioning
economic activity will result in lower premium collections
even during the lockdown, the impact of COVID-19 resulted
in the general insurance segment. Decline in key sectors
in substantial declines across all products. There are signs of such as auto, manufacturing and construction is expected
improvement in the consumer segment as well. For the first to heavily impact insurance industry as they account for
time in 20 months, passenger vehicle dispatches grew year- more than 47% of general insurance premiums in 2019.
on-year. Again, this growth was on a low base and partly in Motor industry is facing severe slowdown due to supply chain
anticipation of higher festival sales. Retail sales remained disruptions, stalled production and low demand.
subdued in August. Tractor sales showed sharp improvement
(75%) in August, helped by rising rural demand.
In April 2020, automobile manufacturers registered zero
sales due to the lockdown. Sales have picked up marginally
Domestic air passenger growth (-82%) showed no material
in May after the lockdown restrictions were eased by the
improvement. Broadband subscriber growth remains in
government; but are well below the pre- COVID levels.
positive territory but growth remains much below the five- Lockdown restrictions are being eased by the government;
year-average level. Consumption indicators could improve however the risk of outbreak persists as large number of
further in the coming months because of pent-up demand cases is being registered daily across the country. While the
and the festive season. The consumer sector has been hit easing of lockdown restrictions will help revive the stalled
hard by the pandemic, with the demand recovery in non- business operations, recovery in general insurance segment
essentials still muted so far. is expected to be a protracted one, taking as long as the
second half of financial year 2021.
The demand for essentials has recovered, largely driven by
pent-up demand in rural India. India's financial metrics were
Indian economy is now expected to grow at 1.63% in the
more resilient in August but the stock market correction over
financial year 2020-21, as compared to the pre- COVID
the past few weeks has raised fears that markets may not estimate of 6.4%. The slowdown in the economic activity
will result in lower premium collections in the
general insurance segment. Traditionally, it has
been a high-touch and relationship-driven sector
and, thus, the lockdown resulted in the loss of
both new and ongoing businesses. The traditional
approach of selling protective products is
nowhere near enough for the insurer of the
future.

Digital disruption and demanding customers mean
that insurers need to innovate to stay relevant
within their own industry. When looking at new
roadmaps for growth the industry should look to
China, which has been identified as the fastest-
growing market for insurance. High frequency
indicators, as laid down by OECD insurance
statistics supports insurers to pick up pace;
6 July - December 2020 Life Insurance Today