Insurance Sector: Leveraging a Billion Dollar Industry : By Isha

Introduction

Any country's economic development is dependent on the insurance industry. In India, the insurance business has grown significantly in the previous decade, with the launch of a large variety of modern products.

Life insurance and non-life insurance are the two types of insurance available in India. Both life and non-life insurance are under the jurisdiction of the IRDAI. There are 57 insurance companies in India, with 24 being life insurers and 34 non-life insurers. The Life Insurance Corporation (LIC) is the sole publicly traded life insurance company, and there are six public sector insurers in the non-life insurance segment.

By providing security for unanticipated catastrophes and loss-causing incidents, a well-developed insurance industry increases an economy's risk-taking capacities. Being one of the greatest investors in the financial markets, the insurance sector makes a significant contribution to the capital markets, resulting in increased large-scale infrastructure development in India.

• The life insurance sector is expected to increase at a CAGR of 5.3 percent between 2019 and 2023. In FY21, India had a 4.2 percent insurance penetration, with life insurance accounting for 3.2 percent and non-life insurance accounting for one percent.

• According to S&P Global Market Intelligence, India is Asia-second-largest Pacific's insurance technology market, accounting for 35 percent of the country's US$3.66 billion insurtech focused venture investments.

Insurance Portfolio

The premium amount collected in the Indian insurance market has been steadily increasing. The total premium collected in the life segment increased by 1.62 times to Rs.5,08,132.03 crore in FY2018-19, while the non-life segment grew by 2.18 times to Rs. 1.69.448.46 crore. The government stated its plan to alter the Insurance Act of 1938, increasing the legal FDI limit in insurance companies from 49 percent to 74 percent and allowing foreign ownership and control with safeguards, as part of Budget 2021-22. It could result in the insurance industry expanding, boosting penetration, competition, and value for clients in the form of better products at reduced prices. ICICI Prudential Life Insurance (18.84 percent), ICICI Lombard General Insurance (25.35 percent), SBI Life Insurance Company Ltd. (26.20 percent), General Insurance Corporation (7.00 percent), and HDFC Life Insurance Company (22.61 percent) are the stocks and segments that were analyzed.

Ratios:

Market Cap Distribution:

• Large Cap: 93.00%

• Mid Cap: 7.00%

• Small-Cap: 0.00%

Past Performance Comparison with Equity Large Cap:

The Insurance Industry's Major Trends in 2021

As we look forward to what 2021 may bring, it's important to realize how unpredictable our world is. We wouldn't need insurance if it wasn't. Uncertainty is essential to our survival.

Consumer requirements and expectations evolved dramatically as a result of the ongoing COVID-19 epidemic. Fortunately, the Indian insurance business made the best use of technology throughout the difficult times and provided the best possible service to customers.

• Contactless Payments: Insurers realized that the traditional strategy of marketing insurance products to clients would no longer be enough to keep them ahead of their competitors. For sales, the insurers focused on using the telemedical process. Purchasing insurance through digital channels simplified the procedure and provided a wide range of insurance options to choose from.

• New Insurance Products: As people became more conscious of the need for protection, the demand for insurance products for a variety of risks that were previously not covered by insurance firms began to grow. For example, the Corona Rakshak plan, which is offered for a duration of 3.5 to 9.5 months and costs as little as Rs. 100 each month.

• Rise in Demand for Standardized Products: 2021 will be the year of standard insurance products. On the advice of IRDAI, all general and specialty health insurers launched a standard health insurance product, Arogya Sanjeevani, in 2020. The goal of the regulator is to put as many people as possible under the insurance umbrella. In 2021, all standard items are projected to gain traction. In addition, in the coming year, more basic insurance products are expected.

• On-Demand Insurance: Switch-on and Switch-off insurance would be another high-demand insurance type in 2021. Customers nowadays demand products that provide appropriate coverage only when it is required. Usage-based car insurance is one example of such a product. These options may lower auto insurance prices for infrequent drivers. Furthermore, having numerous vehicle options under one scheme increases its value assertiveness.

• Wellness Products and IoT: Health policies have changed greatly in terms of structure and features. With successful wellness and preventative healthcare initiatives, consumers began to practice a healthy lifestyle. The insurers were expected to come up with a slew of advantages for policyholders. Discounted OPD consultations or treatments, medications, health tests, and many other perks are available.

The Internet of Things is another important technology that will shape the online insurance market in the next few years (IoT). It would save total expenses, assist insurers, and allow clients to operate and initiate numerous operations automatically.

Conclusion

The foregoing trends show that the insurance sector may create new value worth billions of dollars by understanding how and when to tap into the potential using existing and new technology.

In terms of gross direct premium income, the general insurance business is predicted to grow by 7 to 9 percent in FY22. IoT continues to outperform telematics and client risk management in the Indian insurance sector. The rise of the insurance business in India would be aided by rising insurance awareness, retirement planning, a growing middle class, and a young insurable population. Expanding life expectancy, favorable savings, and more private-sector employment are expected to fuel future demand for pension systems. Similarly, major expansion in the automotive industry will be a key driver for the automobile insurance market during the coming decade. Due to the slew of regulatory changes that improved the industry's business operations and client engagement, the future of the insurance sector seems bright.