Optima Insurance Brokers Pvt. Ltd.

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.

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.