Optima Insurance Brokers Pvt. Ltd.

In India, almost all cyber insurance customers are renewing their policies as a result of the increased awareness of cyber threats. Regulatory compliance and growing cyberthreats have been the main drivers for 100% renewal rate with an annual turnover of more than ₹10 crore. The cyber insurance market has grown dramatically in the last two years.

35% to 40% of cyber insurance policyholders are in the Banking, Financial Services, and Insurance (BFSI) sector, with 30% coming from the IT and technology sector. As businesses in the IT and BFSI sectors are increasingly demanding that partners and vendors have cyber insurance as part of contracts.

The Startups make up 25% of adopters, and healthcare & logistics hold 5% share each.

Most importantly, 30% to 35% of cyber insurance customers are first-time purchases, indicating a trend toward proactive cyber risk management. Many startups and mid-sized businesses that once undervalued cyber risks are now realizing the operational and financial consequences of hacks.

Data breach-related business interruption is the primary reason for compensation, accounting for 45% of cyber insurance claims. Whereas, Ransomware occurrences account for 20% of claims, social engineering attacks for 25%, and other reasons for 10%.

In a path breaking development for Indian insurance industry, Valueattics Reinsurance Ltd. will become India’s first reinsurer exclusively dedicated to the reinsurance business. Insurance Regulatory and Development Authority of India (IRDAI) recently granted approval and issued the certificate of registration to Valueattics.

This development aims to encourage competition and innovation in the reinsurance sector in India which is historically dominated by state-owned entity, GIC Re, the only reinsurance company operating in India. Designated as the national reinsurer in India, GIC Re has certain privileges, such as the first right of refusal and obligatory cession.

The entry of private players like Valueattics Reinsurance could lead to better pricing, improved products, and enhanced service offerings, benefiting both insurers and policyholders with improved capacity to underwrite risks and support the overall growth of the Indian insurance sector.

Promoted by Canadian businessman Prem Watsa’s FAL Corporation and Kamesh Goyal’s Oben Ventures, Valueattics Re has now received the R2 license from IRDAI, bringing it one step closer to commencing operations with a paid-up capital of INR210 crore($24.3mn).

The Indian market currently has 13 foreign reinsurance branches.

Public Sector General Insurance Companies (PSGICs) in India earned a combined profit of Rs 1,066 crore in Q3FY25, marking a significant financial turnaround from historically reported losses. The PSGICs had combined losses of over Rs 10,000 crore in 2022–23.

This remarkable turnaround in Q3FY25 wherein all individual PSGICs became profitable was a result of reforms leading to improved risk-management practices, loss-control initiatives, technology adoption, new product development, improved customer services, and portfolio diversification.

United India Insurance Company Ltd (UIICL) reported a profit in Q3 of 2024-25 after seven years while Oriental Insurance Company Ltd (OICL) and National Insurance Company Ltd (NICL) began reporting quarterly profits in Q4 of 2023-24 and Q2 of 2024-25, respectively.

Notably, New India Assurance Company Ltd (NIACL) has continuously made money and held its market leader position. In Q3FY25, NIA’s net profit dropped by almost 51% to Rs 353 crore.

This turnaround came on the back of capital infusion of Rs 17,450 crore in these PSGICs between 2019–20 and 2021–22 in order to enable these businesses to implement structural changes, improve operational effectiveness, and return to profits again.

PSGICs are focusing on providing top-notch insurance products and services, guaranteeing long-term viability and improving customer satisfaction, all the while attaining growth to achieve “Insurance for All” by 2047.

Indian insurance market is on rise with the total insurance premiums growing by 7.7% in FY24 and reaching Rs 11.2 lakh crore, despite a minor drop in insurance penetration from 4% in FY23 to 3.7% in FY24. While non-life insurance penetration stayed steady at 1%, life insurance penetration decreased slightly from 3% in FY23 to 2.8% in FY24.

It is noteworthy that Indian insurance industry received the highest FDI at 62% of total equity FDI inflows to the services sector. A growth opportunity exists in Tier 2 and Tier 3 cities with an insurance penetration rate of 3.7%, lower than the global average of 7%.

Innovative distribution models can help enhance Insurance density in India, having increased slightly from $92 in FY23 to $95 in FY24, which is still lower than global standards. While Life insurance density stayed steady at $70, non-life insurance density rose from $22 to $25.

Non-life insurers’ gross direct premiums grew by 7.7% year over year, from Rs 2.6 lakh crore in FY23 to Rs 2.9 lakh crore in FY24, led primarily by Health and Motor segments.

With premium income of Rs 8.3 lakh crore in FY24 compared to Rs 7.8 lakh crore in FY23, the life insurance sector grew by 6.1% YoY. New businesses contributed the remaining 45.6% of the total premiums received by the life insurers, with renewal premiums making up 54.4%.

In FY24, the life insurance sector disbursed benefits totaling Rs 5.8 lakh crore, of which Rs 42,284 crore was attributable to death claims. In same period, non-life insurers’ net incurred claims totaled Rs 1.72 lakh crore.

2025 ushers in with prospects of high growth in the Non-Life Insurance sector in India despite flat general insurance penetration. An estimated 14% annual growth rate for 2025 is driven by an integrated digital public infrastructure reducing costs, hyper-personalised solutions and a conducive regulatory environment to extend insurance reach to underserved areas.

Moreover, the Non-Life insurance industry is expected to benefit with a favourable outcome on GST relief and a revisit of third-party rates for motor insurance.

As per Insurance Regulatory and Development Authority of India (IRDAI), the insurance density (ratio of premiums collected to the population) in the non-life industry of India has increased to USD 25, up from USD 22 in 2022-23.

The annual high growth will be led by health insurance with significant expansion in non-motor and non-health segments like pet insurance, liability, professional indemnity, and housing insurance. Cyber insurance, parametric insurance for disaster management and surety bonds as alternative means of infrastructure financing is expected to gain prominence going forward.

As per industry experts, there is a need to provide affordable and accessible insurance with much needed innovation in underwriting, product development and customer service, to increase insurance penetration and spread its growth into tier-2 and tier-3 cities across India.

As per Swiss Re, a reinsurance major, India’s insurance sector is projected to grow the fastest among G20 countries, with an average growth rate of 7.1% in the total premium in comparison to the global average of 2.4% between 2024 and 2028.

The Indian government is preparing to implement significant reforms in the insurance sector by permitting 100% foreign direct investment (FDI) in insurance firms. This potentially transformative decision will enable international players to enter the market independently and will also allow individual insurance agents to sell policies from various companies, marking a notable shift from the current restriction to a single association.

These policy changes are components of the Insurance Amendment Bill, which is scheduled to be presented in the upcoming winter session of Parliament. This initiative aims to achieve “Insurance for All by 2047,” as per the Insurance Regulatory and Development Authority of India (IRDAI).

The existing ceiling for foreign direct investment in insurance firms is set at 74%, with intermediaries benefiting from relaxed regulations. The industry currently consists of 24 life insurance companies, 26 general insurance firms, six standalone health insurers, and one reinsurer—General Insurance Corporation. By increasing the FDI limit to 100%, the policy change intends to entice new entrants with the financial capacity necessary to underwrite policies in a capital-intensive sector and in turn expand the Indian insurance market with new players.

Apart from the FDI proposal, allowing agents to directly sell policies from multiple companies is another policy initiative being considered for implementation. It will make it easier for agents to operate in transparent and efficient manner. Moreover, IRDAI has proposed enabling insurers to obtain composite licenses, allowing a single company to issue both life and non-life insurance policies.

These new measures will set Insurance in India for a breakthrough growth as insurance penetration in India remains low at 4% and 100% FDI will drive innovation in this capital-intensive industry with presence of standalone Foreign Insurance companies.

Non-life insurers in India are upbeat, having reported a 27.53% year-on-year (Y-o-Y) premium growth in October 2024. This high rate of growth in business results of general insurers, is driven by standalone health and multi-line insurers, and aided by recovery in motor sales.

In October 2024, general insurers collected premiums of Rs 25,396.68 crore, showcasing a 23% Y-o-Y increase. The biggest of general insurer, New India Assurance, reported a 0.62% Y-o-Y increase in premiums, while the second largest, ICICI Lombard General Insurance, posted a 7.48% Y-o-Y growth. Other PSU insurers, United India Insurance reported a 2.44% Y-o-Y rise, National Insurance exhibited a 156.70% Y-o-Y growth to Rs 2,488.12 crore, and Oriental Insurance’s premiums went up by 11.6%.

The other major private players in general insurance, Bajaj Allianz General reported over 100% Y-o-Y growth to Rs 3,859.72 crore, while HDFC Ergo witnessed a decline of 10.39% Y-o-Y to Rs 1,629.85 crore.

Most importantly, Standalone health insurers (SAHI) reported a healthy growth in premiums of 25% Y-o-Y in October, touching Rs 3,119.06 crore, with Star Health and Allied Insurance reporting a 13.7% Y-o-Y growth to Rs 1,283.63 crore.

The Insurance Regulatory and Development Authority of India (IRDAI) has updated the reporting format for premium with effect from October 1, 2024, in which long-term premiums are to be reported based on the 1/N method, where N is the number of days of the policy. With its implementation in progress, the premium growth numbers are not directly comparable.

During April-October 2024 period, non-life insurers registered a growth of 9.9% Y-o-Y in premiums, led by the performance of SAHI players, posting a 24.77% growth in premium. General insurers reported a 9.02% Y-o-Y increase in premiums during this period.

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.