Weekly Insurance Round-up Tuesday, October 19, 2021
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- The National Insurance Academy (NIA) organized an insurance summit on 14th October 2021 to discuss ways to reduce the insurance protection gap. The protection gap is the difference between insured losses and total economic losses.
- Even after increased awareness and curiosity towards health insurance post-Covid-19, insurance penetration is still low in India. (3.76% as of FY2020)
- Further, due to the financial burdens resulting from the pandemic, the insurance protection gap (that is usually between 83% to 92%) has widened in 2020.
- Insurance chiefs present at the summit opined that insurance penetration can only be increased with a combined effort from insurance companies, the regulator, and the government.
- They also discussed how -
- Claim rejections could be prevented by understanding the customers well at the initial stage.
- Insurers should reduce their dependence on medical tests for underwriting, and instead use data and technology to assess risks better.
- Insurers should engage with the customer beyond just contacting them yearly for renewal premiums.
- People taking better care of their health should be rewarded through better insurance products.
- Insurance penetration could be increased by improving distribution via point of sales, and common service centers reaching out to newer geographies.
- These measures will help bridge the distance between insurers and their customers, and thereby improve product penetration.
- Beshak Take:
- While Covid brought about an increase in awareness about the need for health and life insurance products, the reach and penetration have remained low - given the financial crunch faced across economic classes - especially amongst the economically weaker, rural families.
- It is important to address this widening gap, and take insurance to locations across the country, especially where the availability is less.
- IRDAI has also suggested insurance companies adopt and provide 100% insurance in villages.
- The life insurance industry witnessed a positive growth of 5.8% in the first half of FY22, in contrast with the 0.8% decline in the first half of the previous year.
- As per IRDA’s New Business statement of Life insurance -September 2021 the life insurer’s first-year premium rose by 22.21% (from ₹25366.32 in September 2020 to ₹31001.17 in September 2021).
- While private life insurers posted a growth of 42.42% in September 2021 (more than double of the 20.09% growth in September 2020), LIC posted a growth of 11.55% in September 2021 (drastically lower than the 30.12% growth in September 2020.)
- Even when you look at the half-yearly growth figures, we see that private life insurers have grown by 27.68% in the first half of FY22 (over 10times the 2.60% growth in the first half of FY21), whereas LIC showed a drop of 3.30% (compared to a drop of 2.18% in FY20.)
- Beshak Take:
- While there was a drop in the life insurance business at the beginning of the pandemic, the industry saw steady growth over time owing to better awareness about the need for insurance, better products, 100% online services, improved experience, etc. - despite the rise in premiums by insurers.
- We expect that this growth will continue for the foreseeable future, while premiums too will continue to increase to provide insurers the much-needed cushion to deal with the unpredictable situation.
- Non-Life insurers’ gross direct premium decreased by 2.8% (from ₹22,870.82 Cr. in September 2020 to ₹22,226.40 Cr. in September 2021)
- Comparing premiums collected in September 2021 and September 2019, the pre-pandemic times - there is a decrease of 10% from ₹24,563.24 Cr to ₹22,226.40 Cr
- Compared with last year though - that is, revenues of General Insurers between September 2021 compared to September 2020, there is a slight increase of 0.62% (from ₹18,903.97 Cr. to ₹19,021.70 Cr. in September 2021).
- Further, there is also a 10.88% increase in revenue (Y-o-Y) from 2020-21 to 2021-22.
- Standalone insurers witnessed an increase in revenue of 32% in September 2021 as compared to September 2020 (from ₹1,324.98 Cr. to ₹1,743.03 Cr). There is a 39.39% increase in revenue from 2020-21 to 2021-22.
- Specialized PSU insurers (Agricultural Insurance Company of India Limited, ECGC Limited) revenue saw a decrease of 45% (from ₹2,641.87 Cr. in September 2020 to ₹1,461.68 in September 2021). There is a 9.79% increase in revenue from 2020-21 to 2021-22.
- PSU insurers revenue went down by 6.08% (₹8464.75 Cr in September 2020 to ₹7949.82 Cr in September 2021). There is a growth of 8.07% in revenue from September 2020 to September 2021 (from 35647.52 Cr to ₹38525.35 Cr).
- Beshak Take:
- While many people bought health insurance due to the fear of Covid-19, there are still many who think that they don’t need it, or think it is too expensive for them to invest right now. A majority of insurance investors are from the middle and upper-middle economic classes, and a large chunk of the population is left uninsured.
- Reaching out to people who do not have proper facilities or knowledge about insurance might help in increasing insurance penetration and thus improving the business.
- As per the CARE Rating, motor insurance is now showing signs of growth post-pandemic. With the lockdown being lifted and things getting back to normal, increased vehicle sales might be the reason driving this growth.
- The motor sector was severely affected due to the pandemic as the nationwide lockdown led to a decrease in sales. And even those with existing vehicles did not renew their insurance as they weren’t using their vehicles.
- Between FY20 and FY21, the motor insurance premium saw a compound annual growth rate (CAGR) of 14.5% (from ₹15,343 Cr. in FY20 to ₹67,764.7 Cr in FY21). (CAGR is the rate of return required for an investment to grow from its beginning balance to its ending one.)
- The gross premium collected in August 2021 was ₹23,500 Cr which was 5.9% more than ₹22,200 Cr collected in August 2020.
- As per CARE, there are many uninsured vehicles, and with digital issuance and online channels, the motor insurance business is only expected to rise more, in the upcoming months.
- Beshak Take:
- The pandemic did hit the motor sector hard, as the lockdown brought to a standstill - both sales and insurance of vehicles. But now with the lockdown being lifted and sales of the vehicles resuming, the motor insurance sector too, is picking up pace gradually.
- As per the CARE analysis, the uninsured vehicle percentage is also found to come down to 57% in March 2020 as compared to the 60% in March 2018. The decrease is not much but can reduce further in the next few months.
Source: The Economic Times
- Several senior industry experts approached IANS and shared their views seeking a reform of the industry, through abolishment of the license permit raj, and having the IRDA lead by a dynamic, young leader who will focus on and achieve better insurance penetration in the country.
- The first IRDAI Chairman, Mr. N. Rangachary suggested that IRDAI needs a review as it is more than two decades old. He said there’s a need to form a review committee to look into all regulatory aspects so as to check if the initial goal of forming a regulatory body is being fulfilled or not. If not then it’s time to take proper action.
- They said that IRDAI has become a hub for retired industry personnel - and about the urgent need to change this, especially in view of the rapid changes adopted across the finance industry in terms of innovation, business leadership, and technology.
- Currently, IRDAI issues licenses for insurers, intermediaries, and outsourcing agencies like healthcare claim processing companies. Issuance of these licenses is decided by previous officers, and there is no time limit set to clear the applications.
- No vigilance probe is found to be registered against any IRDAI official with regards to such corruption, delays, or malpractices in its 20 years of existence. This discussion sought such a vigilance officer, a neutral, outsider who would work on behalf of the IRDAI and drive operational efficiency.
- Beshak Take:
- While the financial sector is moving at a faster pace to match the evolving market, the Insurance industry is yet to match this pace. Insurers - even those with helpful, innovative products ready to go to the market, have to wait for ages for IRDAI approvals.
- To add, there are lots of restrictions on insurance companies with no flexibility to experiment and deliver new-age innovations as freely as the rest of the financial sector.
Source: Business Standard
- Shivalik Small Finance Bank is partnering with Go Digit Insurer with an aim to provide easy-to-understand insurance products to their customers.
- The customers of Shivalik Small Finance Bank across all branches will be able to access and purchase Go Digit’s health, motor, home, and shop insurance products in real-time.
- With this partnership, both organizations aim to expand their customer base and to cater to newer customer segments. Digit can expand into the Northern states as Shivalik Bank has a strong customer base there.
- The bank is currently in discussion with other fintech partners to cater to newer customer segments like entrepreneurial and underbanked women, Kirana stores, individuals looking for gold loans, etc.
Source: Business Line
- Pristyn Care, a healthcare startup, is in talks with various investors including Sequoia Capital US for raising $90-110 Mn which will value the company at $1.2-$1.4 Mn.
- The startup provides end-to-end services such as free post-surgery consultation, claims support, home delivery of medicines, cab pick up and drop for surgery, etc.
- With more than 150 clinics and over 700 partner hospitals, the company currently operates in more than 40 cities including NCR, Hyderabad, Bengaluru, Chennai, Kolkata, and Mumbai.
Source: The Economic Times
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