A Peek Into the Insurance Industry
The insurance industry in India is vast with over 58 insurance companies spread across the country. The overall market size of this sector was valued at $280 billion in the year 2020. Between 2019 and 2023, the growth of this sector with a CAGR of 5.3% is expected, thereby contributing to the ever-growing nature of this sector and rasing need for good insurance software solutions. In addition, the government has also taken plenty of initiatives to boost the insurance industry. For instance, in August 2021, the Government of India approved an investment worth Rs. 6,000 Crores into entities. This approval ensured the offering of export insurance cover in order to facilitate additional exports in the next 5 years worth Rs. 5.6 Crores.
Similarly, the government has also taken other initiatives to support the other segments of the insurance sector. This brings into the light the different types of products available in this sector. The products range from life insurance, health insurance, and motor insurance to home insurance, and others. Of these available products, it’s key to note the market penetration that these insurance products have. In FY 2020, there was just about 3.76 percent of market penetration whereas in FY 2021, there was 4.2 percent penetration. Overall, according to the Swiss Re Institute, India has observed a positive increase in market penetration of 0.1 percent and has a global market share of 1.7 percent.
Insurance is typically bought either directly from the insurer or through independent agents and commercial brokers. This is called the insurance distribution business. Over the time of the Covid-19 pandemic, the insurance distribution business has grown manifold. One of the products of insurance that experienced a spike in market penetration was health insurance.
Current scenario of penetration of Insurance distribution
There has been a need for a sharper and improved distribution strategy for insurance products. Covid-19 has contributed towards accelerating the process of change in distribution models across different industries. Distribution is a critical link to ensure the relationship and reach between the product and the customers. The pandemic drove insurance providers to integrate the best practices of distribution and technology as well. The process of insurance sales, in particular, has faced the most disruption. The traditional means of insurance sales involved face-to-face meetings and the physical presence of the customer at the insurance office. However, with Covid-19, there has been increased adoption of digital technologies thereby allowing virtual and remote sales.
Another aspect that has led to the increased penetration in the insurance landscape is the Bancassurance channel. This channel has highlighted the aspects of increased trust of customers with banks rather than other private entities. In 2019, the IRDAI also introduced a new distribution channel called Common Public Services Centres for the rural market in specific. Overall, these initiatives have resulted in the total number of rural authorized personas to 16,555 as of FY 2020. This has also contributed to the total insurance premium collected in FY 2020 to roughly contribute to one-third of the insurance market amounting to Rs. 253 Crores.
Areas of fallback
One of the main areas that have resulted in resistance towards increased insurance penetration is the lack of education among customers. In addition, customers also consider insurance policies to be an expense rather than a long-term asset. A shift in this perception can help increase penetration across the entire insurance industry. Another reason for this low penetration can be attributed to the complex paperwork in non-digitized processes.
Scope for Improved Market Penetration
Some of the areas that can be considered for potential venturing for insurance companies are the segment of digitization and the process of increasing awareness. Digitization can help eliminate customer resistance due to feasibility, accessibility, conveniences, and complex paperwork. Increasing awareness is also a potential pathway for insurance companies as it can help increase market penetration by providing a different perspective to customers. Ultimately, exploiting these areas can be beneficial for the insurance industry.
Why is Improved Penetration of Insurance Distribution Important?
While the insurance sector in India has been experiencing dynamic growth over the last few years, its global market remains abysmally low. Having an increased penetration of insurance distribution can eventually lead to a positive overall economic impact. The industry of insurance contributes a reasonably large amount to the country’s GDP. Experiencing increased penetration can contribute to an increase in GDP. Moreover, it can also improve the overall benefits received by the customer thereby improving their quality of lives. Ultimately, these benefits can be achieved by increased investment in insurance products and improved digitization.
How can Winsoft’s SmartInsurance help with the process?
Winsoft’s Smart insurance can help with the digitization of the insurance distribution business. It can help increase productivity, profitability, and scalability of the company. The end-to-end life and non-life health insurance distribution software with digital processes helps with increased penetration and ease of use. Some of the other features of Smart Insurance are that it has a flexible open framework and it comes with accurate income calculation and reconciliation to detect income leakages. There is also an advisor portal, operational portal, customer portal, and business MIS. With Smart Insurance, you can also support all your regulatory and audit compliances.
While the insurance segment has experienced dynamic growth, there is potential for improved market penetration. Digitization is one of the key trends that have been observed in insurance software solutions. However, improved digitization and increase in adoption of awareness programs can be beneficial to enhance market penetration. With Winsoft’s Smart Insurance, you can enhance your digitization, reduce dependencies on policy data from insurance companies, stay compliant, and detect income leakages among others.
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