Optima Insurance Brokers Pvt. Ltd.

India is a land of festivals, and not just people but also insurers keenly await the onset of festivals. Large-scale celebrations of big festivals like Dahi Handi, Ganesh Puja, Durga Puja, Dussehra, and Diwali Mela prompt organizers of such large community-led pomp and show to look for insurers, for coverage and recovery of any accidental costs to the organizers and celebrating public or participants.

With many state governments of India, supporting the public celebrations of festivals unique to their states, organizers are encouraged to opt for comprehensive insurance packages to safeguard their assets, participants, and any third-party claims.

For example, Insurers have almost covered over 90,000 Govindas, who form human pyramids on the Dahi Handi festival, this year with active support from the Maharashtra Government. Typically, a participant gets covered for Rs 10 lakh in such insurance coverage, at a nominal premium of Rs 75. Moreover, festival venues known as mandals also take insurance separately, with 1,500 mandals expected to get covered under insurance this year.

With increased awareness, tailored product offerings, and increasing focus on the safety of the public, Festival insurance premiums in India are expected to grow at  15-20% for FY25. Insurance packages cover accidental injuries, the risk to life, damage to idols, mandaps, decorations, public liability, and fire hazards.

With celebrations like Krishna Jayanti, and Ganesh Puja over, Festival insurance is expected to take center stage in India with Durga Puja, Dussehra, and Deepawali celebrations, turning the festival season in India into a big opportunity for the insurers.

The Insurance Regulatory and Development Authority of India (IRDAI) in a bid to strengthen governance measures in Insurers’ operations has released a new Master Circular on Operations and Allied Matters of Insurers while repealing 11 previous circulars.

Under this, IRDAI has mandated each Insurer to constitute an advertisement committee, approved by the board of directors, and appoint a senior-level officer of the distribution channel to examine and approve advertisements, to enhance transparency and accountability.

For efficient and speedy grievance redressal of policyholders, Insurers must implement a tech-based robust mechanism aiming for “zero grievances,” ensuring regular customer interface, awareness campaigns, facilitating submission and registration of online grievances with an internal escalation matrix and Ombudsman.

Resolution time is of the essence with an immediate written acknowledgment, if sought further information to be collected once within one week, and the final resolution letter should occur within two weeks.

Advertisements for participating insurance products must disclose the risk factors such as projected bonus is not guaranteed, past performance does not indicate future bonuses and product performance is subject to the insurer’s overall performance.

Insurers must adopt a phygital approach (both physical and digital) to open places of business and make insurance accessible in remote locations of India.

Insurers can outsource permitted activities only if it is cost-efficient and under the oversight of a board-appointed committee.

Policyholders must get an option to avail of services even if and when an insurance intermediary has ceased its association with the insurer.

Insurers must streamline group insurance business with a focus on Insurers issuing a “Certificate of Insurance’ to all members of a non-employer-employee group scheme, consent of nominee/ policyholder/ beneficiary is necessary for repayment of outstanding loan from the proceeds of an assigned policyholder, no claim shall be denied for non-availability of details of members of the group in group Mediclaim policy.

For unclaimed amounts, policyholders can access information with any insurers in one place.

The Insurance Regulatory and Development Authority of India (IRDAI) introduced a comprehensive Master Circular to simplify and modernize the general insurance sector in India as part of reforms and repealed many circulars. The non-life sector will witness the emergence of customer-centric insurance solutions for seamless experience and operational ease for insurers.

Wider product choices and customization will enable customer-centric insurance products and flexibility in covering specific assets, risks, and liabilities.

New Customer Information Sheet (CIS) will provide clear and concise policy details, including scope of coverage, exclusions, warranties, and claim settlement processes for transparency and policyholders’ improved understanding.

Document submission simplification aims to ensure that claims cannot be rejected due to deficiencies in documents. Necessary documents are called for during underwriting, and only essential documents are required for claim settlement if cashless options are unavailable.

Policy cancellation has been eased for retail customers while Insurers can cancel policies only on grounds of established fraud, with proportionate premiums refunded for the unexpired period.

The Master circular aims to expedite claims settlement, by introducing:

Strict timelines: Insurers must adhere to stringent timelines in the appointment of surveyors and in obtaining their reports.

Salvage disposal: Insurers, not customers, handle the disposal of salvage, ensuring policyholders receive their full claim amounts.

Innovative options in motor and home insurance have been included such as “pay as you drive” and “pay as you go” choices, aligning premiums with actual usage.

Recently, NHAI in a workshop on implementation of Insurance Surety Bonds (ISB) for NHAI contracts shared that around 700 insurance surety bonds with a combined value of approximately Rs 3,000 crore have been successfully issued by various insurance companies to date.

Insurers, under ISBs, act as a surety and provide the financial guarantee that the contractor will complete its obligation as per the agreed terms. India’s first-ever surety bond insurance product was launched in December 2022 to reduce the dependence of infrastructure developers on bank guarantees.

NHAI has to date received 164 ISBs which comprises 20 bonds for performance security and 144 bonds for bid securities. To strengthen infrastructure development in the country it is recommended to adopt ISBs as a lead financial instrument.

The insurance surety bonds are equivalent to bank guarantees for all procurements by the government. Hence, NHAI is recommending to all contractors and insurance companies to adopt and utilize insurance surety bonds as an alternate mode for bid security, and/ or performance security submission.

Indian general insurance industry’s gross written premiums (GWP) is likely to witness a growth at a compound annual growth rate (CAGR) of 9.9% from INR 3.35 tn ($40.36bn) in 2024 to INR 4.89 tn ($57.3bn) in 2028, as per GlobalData.

The general insurance industry in India is likely to grow at a healthy rate of 11.2% in 2024, mainly driven by personal accident and health (PA&H), motor, and property insurance lines, all three combined holding a 93% share of the total general insurance premiums in 2023. This performance comes on the back of the 13.2% growth in 2023, continuing its upward trend in 2024 and 2025.

PA&H insurance is the largest segment, accounting for a 39.5% share of general insurance GWP and is forecasted to grow by 14.5% in 2024 on account of higher health awareness and rising medical inflation, exhibiting a CAGR of 12.5% in the 2024-28 period.

Motor insurance, the 2^nd largest segment with a 31.1% share of general insurance GWP, is expected to grow at 10.4% in 2024, driven by rising vehicle sales. Motor insurance is likely to witness a CAGR of 7.9% during 2024-28.

Property insurance, the third largest line of business with a 22.5% share of general insurance GWP, is estimated to grow by 10.4% in 2024, driven by infrastructure projects. The investment trend is likely to continue with property insurance growing at a CAGR of 8.3% during 2024-28.

Liability, marine, aviation and transit, and other general insurance products combined account for the balance 6.8% share of the general insurance GWP in 2024.

As per the research report, economic recovery and increasing disposable income will push the rate of insurance penetration in India (0.98%), in comparison to Japan (1.75%), South Korea (1.46%), Hong Kong (1.65%) and China (1.26%) in 2023.

In the financial year 2023-24, India’s 42 general insurance companies as a whole collected a premium income of ₹2,89,738 crore, making it a 13% growth from the previous year’s ₹2,56,894 crore. Out of these, 35 general insurance companies witnessed a growth of 14% in premium income to ₹2,45,433 crore during the financial year as compared to ₹2,14,833 crore in the preceding year.

Interestingly, five standalone health insurers registered a 26% rise in premium income, to ₹33,116 crore during the year in comparison to ₹26,244 crore achieved in the previous year. The future for the sector looks bright during the current financial year as some major reforms are expected to roll out in India.

The Indian insurance market has witnessed an impressive growth rate in the last two decades primarily driven by the bigger private sector participation and hugely improved distribution capabilities, along with marked improvements in operational efficiencies.

The insurance industry of India has 57 insurance companies; 24 being in the life insurance business, while 34 are General Insurers. It has undergone and triumphed over multiple challenges and changes before becoming one of the fastest-growing markets.

Due to strong demand for health and motor policies, the first quarter of FY24 witnessed non-life insurance premium income increasing by 17.9% year-over-year to Rs. 64,262 crore (USD 7.72 billion)

The premium in March 2023 for the private life insurance industry grew at a good pace of 35% on a year-on-year basis and 20% for FY23.

As per IRDAI data, Life insurance firms collected 18% more premiums in FY23 as compared to the year before. Life insurers collected Rs. 3.71 lakh crore (USD 44.85 billion) as the first-year premium in FY23 as against Rs 3.14 lakh crore (USD 37.96 billion) in FY22.

The Insurance Regulatory and Development Authority of India (IRDAI), estimates that the Indian insurance industry is projected to reach USD 222 billion by 2026 to become the 6^th largest insurance market globally, overtaking countries like Germany, Canada, Italy, and South Korea.

The business factors contributing to the growth of the Insurance market in India are:

1. Favourable Demographics
2. Wide middle-class expansion
3. Technological Advancement
4. Emergence of Point of Salespersons
5. Increased Distribution of Rural Insurance
6. Key Technologies: Artificial Intelligence, Internet of Things, Machine Learning, Application Programming Interface

As per research by Swiss Re, in the coming 5 years, India is forecasted to have the fastest-growing insurance sector of all G20 countries. The Indian economy grew at an estimated 6.7% growth in 2023 outpacing all other major economies supported by private consumption and fixed investment.

The insurance market in India is estimated to have a positive outlook on the basis of economic growth, an expanding middle class, innovation, and regulatory support. Over the next 5 years (2024‒28), it is forecasted that total insurance premiums will grow by 7.1% in real terms, way ahead of the global (2.4%), emerging (5.1%) and advanced (1.7%) market averages. Propelling India to be the fastest-growing insurance sector of the G20 countries.

Supported by rising demand for term life cover by the middle-class and the young population of India, and with rising adoption of Insurtech, the life business will experience robust growth (premiums up 6.7% in 2024‒28).

Driven by economic growth, improvement in distribution channels, government support, and a favourable regulatory environment, the Non-life premiums are forecasted to rise by an annual average of 8.3% during 2024‒28.

National Insurance Academy (NIA) has proposed to make natural catastrophe (NatCat) cover compulsory in highly vulnerable and disaster-prone areas, with a view to reducing the impact of any natural calamities in the future and building resilience.

The proposed NatCat cover must cater to region-specific needs considering climate change, urbanization, and hazard risk vulnerability, by developing a single peril customized NatCat peril insurance.

This is going to be a huge collaborative effort involving government, insurers, reinsurers, brokers, and intermediaries as per NIA’s report on ‘Enhancing Insurance Inclusivity and Bridging the Protection Gap in India.’

The proposed solution mandates that commercial organizations allocate a certain percentage of revenue every year towards climate change or DRR (disaster risk reduction), exploring the possibility of ‘CAT bonds’ for additional funding capacity. It also mooted compulsory crop insurance for loanee farmers, supported by financing from microfinance institutions and Agri-input suppliers, implementation of parametric-based insurance, and embedded insurance solutions for scaling up property insurance in India.

As per 2022 Swiss Re data, India currently faces a 95% NatCat protection gap, and it is likely to increase with rising climate risk exposures, infrastructure development, and rural-to-urban migration. As per Munich Re, 91% of NatCat losses are triggered by weather-related perils, increasing volatility and complexities in reinsurance.

It is suggested to focus on lower-income and less-educated segments for better insurance awareness and leveraging technology and analytics, through collaborations with insuretech, for personalized services and customized home insurance with NatCat risk protection and value additions like home security, maintenance, and repair services.

Insurers can offer coverage against these disasters and cross-sell/up-sell to existing customers for revenue growth and loyalty improvement, and to address emerging risks by developing climate and cyber insurance as top-up covers under standard fire insurance or property insurance for both individuals and corporations.

Adding that claims services can be enhanced through satellite-based hazard risk and loss assessment using remote sensing and geospatial technologies.

Marine cargo insurance policies are vital for the businesses involved in the transportation of goods, in particular shipping across the Israel-Gaza region. War damage coverage has the potential to increase the reinsurance rates which is causing jitters amongst the Indian Insurers amidst the ongoing military conflict in a region of the world that has immense trade value and importance.

HDFC Ergo and other Insurance companies in India have strategically opted to cancel the coverage for damages as a result of sabotage, strikes, riots, lockouts, and vandalism in Israel/ Gaza/ Lebanon because of the ongoing war. This will help reduce the risks associated with war-related actions.

The prime reason for such a move is the mounting concern on account of the rising reinsurance costs associated with such conflicts. This will help Insurance companies in India to keep claims in check and mitigate its potential impact on reinsurance premiums and rising costs.