Insurtech Industry

The Insurtech industry has revolutionised the traditional insurance model by integrating innovative technology, including AI, IoT, and data analysis. Insurtech industry intends to enhance efficiency, streamline processes, and facilitate more customized insurance services in India. The insurance market has witnessed remarkable substantive growth driven by diverse factors, including public sector participation and increasing intense awareness among citizens. Insurtech industry has significantly transformed the insurance landscape by enhancing the customer experience and operational efficiency and reducing fraud. With proper and favourable support of demographics, government initiatives, and technological advancements, the insurance sector is poised towards sustainable growth and innovations. Diverse technologies, AI, automation, big data, blockchain, drones, and IoT are driving the evolution of Insurtech industry and promising a more dynamic and responsive insurance ecosystem.

Insurtech Industry

Insurtech refers to the innovative use of technology truly designed to find cost savings and efficiency from the existing insurance industry model. Insurtech is a combination of two words, insurance and technology, which are inspired by the term fintech. The innovative use of technology in insurtech industry, including data analysis, IoT, and AI, is to make the entire existing insurance model more effective and efficient. Insurtech industry is widely used to make more effective processes on claims, evaluate market risks, process contracts or underwrite any policies. In a broader sense, insurtech industry is more similar to fintech industry, as both leverage modern solutions that are revolutionizing every traditional sector. Insur Tech has become the most powerful driver of change in the insurance industry landscape.

Insurance Industry Market Size 2031

The Insurance industry within India has witnessed an impressive growth rate within the last two decades, driven by huge private sector participation and improvement in distribution capabilities, along with substantial improvements in operational efficiencies. In FY24 (till September 2023), non-life players' premium income increased by 14.86% year over year to INR 1,43,802 core (USD 17.29 billion) due to strong market demand for health and motor vehicle policies. The non-life insurance industry has remarked a growth of 14.86% during its first half of FY24 as compared with the growth of over 15.30% in the same period of the previous year. Health insurance policies and motor and crop insurance duly drove the business growth during the first half of FY24. Within April-November 2023, the life insurer's new business premium will reach approx. 211,690.65 crore (US$ 25.38 billion) in accordance with the reports of the Life Insurance Council. Premiums during the 2023 March for the private life insurance industry have witnessed a significant growth of 35% in health on a year-on-year basis and 20% in FY23. Life insurance firms in FY23 collected 18% more premiums than the previous year. Life insurers have collected INR 3.71 lakh crore (US$ 44.85 billion) as the first-year premium in FY23 as against INR 3.14 lakh crore (US$ 37.96 billion) during FY22, as per the latest IRDAI reports. Mr Debashish Panda, Chairman of IRDAI, has informed that the entire Indian Insurance Industry has remarked with INR 59 crore (US$ 7.1 million) industry until Feb 2023. Health and motor insurance portions drive the insurance industry; the non-life insurance industry has grown at a remarkable rate of 16.4% during FY23 as compared to 11.1% during the previous year. Among different private insurance layers, SBI Life, HDFC Life and ICICI Prudential Life led the insurance industry in the premium collection. Moreover, SBI Life collected INR 29,587 crore (US$ 3.57 billion) premium during FY23, while HDFC Life and ICICI Prudential Life collected a premium of 28,876 crore (US$ 3.48 billion) and Rs. 16,921 crore (US$ 2.04 billion) respectively in FY23. As expected, the LIC alone contributed over 60% to the total new business premium collection. The insurer received close to Rs. 2.31 lakh crore (US$ 27.93 billion) as a premium in FY23 compared to Rs. 1.99 lakh crore (US$ 24.06 billion) in FY22. Among the private players, SBI Life, HDFC Life and ICICI Prudential Life led the industry in premium collection. SBI Life collected Rs. 29,600 crore (US$ 3.58 billion) premium in FY 2023, while HDFC Life and ICICI Prudential Life received Rs. 28,900 crore (US$ 3.49 billion) and Rs. 17,000 crore (US$ 2.05 billion), respectively. As per IRDAI's latest data- the LIC has improved its market shares by 67.72% till October and secured a basis point (bps) of 447. During the end of 2021-22, private players will have 36.75% of the life insurance market shares, whereas the LIC will hold 63.25%.

With approx. 62.58% of the new business shares in the market during FY23, the Life Insurance Corporation of India remains the one and only public sector life insurer within the country that has contributed a lot to the market and become the market leader. During FY23, the non-life insurers, including the general insurers, standalone health insurers, and specialized insurers, recorded a remarkable growth of 16.4% within the gross direct premiums. In India, the gross premiums written off by non-life insurers reached beyond US$ 10.95 billion in FY24 and US$ 31 billion in FY23. The Life Insurance industry was expected to grow at a CAGR of 5.3% during the FY 2019-2023. Indian insurance penetration rate was pegged at 4.2% during FY21, with a life insurance penetration of 3.2% and a non-life insurance penetration rate of 1.0%. In context to insurance density, India has achieved the density, which stood at US$ 78 during FY21. However, the premiums from the Indian Life insurance industry are expected to reach beyond INR 24 Lakh crore (US$ 317.98 billion) till FY31.

In mid of April 2021-March 2022, the gross premiums written off by non-life insurers reached INR. 220,772.07 crore (US$ 28.14 billion), an increase of 11.1% over the same period during FY21. In May 2022, the total premium received by the non-life insurance segment reached beyond INR 36,680.73 crore (US$ 4.61 billion), an increase of 24.15% as compared to the previous year. The market share held by private sector companies in the general and health insurance market has increased from 48.03% in FY20 to 49.31% in FY21 to 62.5% during FY23. Six standalone private sector health insurance companies have registered with a remarkable jump of 66.6% in their gross premium with approx. INR 1,406.64 crore (US$ 191.84 million) during May month of 2021, as against INR. 844.13 crore (US$ 115.12 million) earlier. As per Grand View Research, the total insurtech industry was valued at $5.4 billion in 2022 and expected with the revenue forecast for 2030 will be approx. $152 billion. As per the Global Market Intelligence reports, India has become the second largest dominating insurtech industry market in Asia-Pacific, accounting for 35% of US$ 3.66 billion, insure tech with focused venture investments made within the country.

Understanding the Indian Insurance Industry

Insurtech is premised on the belief that the entire insurance industry is ready for innovation and disruption. Insurtech industry is exploring the diverse factors and platforms that the large insurance firms are less incentive to exploit, as they offer ultra-customized insurance policies and social insurance and use the new innovative streams of data from the internet-enabled devices to provide dynamic price premiums in accordance with observed behaviour.

In context, India's insurance industry is one of the premium sectors that has experienced upward growth. The upward growth of the insurtech industry (Indian insurance industry) can be seen due to the growing incomes in society and increasing awareness in the industry landscape. India is among the fifth largest insurance markets in the world, with an emerging insurance market landscape that grows at a rate of 32-34% every year. In past years, the insurance industry has experienced tough competition among its insurance members, which came with the new emerging and innovative insurtech industry products within the market. Foreign Direct Investment (FDI) in the insurance industry, through the automatic route, is allowed up to 26%, and the licensing of the insurance industry is duly monitored and governed by the insurance regulator, I.e. the Insurance Regulatory and Development Authority of India (IRDAI).

The Indian insurance industry has 67 insurers, of which 24 are in the life insurance business, whereas 26 are general insurers, 5 are health insurers, and 12 are re-insurers, per a report from March 2022. Among the life insurers, including the Life Insurance Corporation (LIC) is the sole public sector company. Moreover, a sole national re-insurer as General Insurance Corporation of India (GIC Re). Other potential stakeholders in the Indian Insurance market include agents (individual and corporate), brokers, surveyors, and third-party administrators servicing health insurance claims. The Indian Insurance industry has undergone numerous transformations that relate to significant developments, modified regulations, proposals for amendments and growth in recent years. These significant developments have opened a new scope of growth for the insurance industry and ensured that insurers can stay relevant in the ever-evolving landscape and with digital disruptions. The Insurance Regulatory and Development Authority of India (IRDAI) is vigilant, progressive, and determined to secure its mission of 'Insurance for all by 2047' with the most effective and aggressive plans to address the industry's challenges. The Insurance market's growth is supported by significant government initiatives, strong democratic factors, an effective regulatory compliance environment, increased partnerships, product innovations, and potential distribution channels.

The insurance industry was largely dominated by different offline channels, including corporate agents, offline brokers and banks. In the recent landscape, the rapid growth of digitalization, product innovation and progressive government policies have made it possible for consumers to purchase insurance using multiple distribution channels. The COVID-19 pandemic has made it necessary for consumers to make investments in these kinds of products, which would definitely enhance and ensure their financial security.

INVESTMENTS AND RECENT DEVELOPMENTS

The specific developments and major investments are done within the Indian insurance sector. The Indian Insurance sector has significantly remarked with huge investments and recent developments, which have shaped its landscape during recent times. One of the notable events occurred in November 0223, when the Zurich Insurance Group announced its acquisition of a majority stake in Kotak General Insurance Company, making a substantial foreign investment after eight years. In the same manner, in July 2023, Go Digital Life Insurance Company, along with the HDFC and Axis Bank, offered a plan to invest INR 500-600 core during its initial 18 months to position itself as India's 26^th-ranked life insurer. Further Collaboration held between the UK and India during September 2023 enhanced cross-market investment in the insurance and pension sectors.

Innovation and product developments are also evident, including Tata AIA's launch of the Tata AIA Pro-Fit, a ULIP plan to cover critical illness, in August 2023. However, the market dynamics have also evolved over time. The introduction of private sector companies in 2000 led their market shares to grow substantially, including notable players such as HDFC, ICICI, and SBI, who competed in the life and non-life market segments. Recently, LIC IPO has witnessed significant growth, being one of the largest IPOs within India, and it has ranked 6^th in the global market during FY2022. Moreover, the Indian Insurance market is poised to grow remarkably beyond US$ 222 billion by 2026. Technology, including Robotic Process Automation (RPA) and AI, will more likely play an important role in automating the processes for faster and more secure customized customer service. Significantly, the recent regulatory development in the Insurance sector enables insurers to launch new products related to health insurance without prior approval, which is expected to provide innovation and streamline the ever-evolving market needs. Strategic partnerships, including the Bajaj Allianz Life Insurance with the City Union Bank, showcase the industry's efforts to widen the service scope and offerings and enhance accessibility. It is evident that the Insurance industry has witnessed significant corporate activities such as acquisitions, collaborations (partnerships), and funding, which showcase a vibrant ecosystem. For example, ICICI Lombard's partnerships with the Airtel payment bank for cyber insurance and the policy bazaar's launched PB Partners Mobile app indicate the significant initiatives that aim to streamline the industry operations and enhance customer experience. With the ever-evolving customer needs and regulatory support, India's Insurance sector will witness sustainable growth and innovation in the industry in the coming years.

Growth Drivers in the Insurance Sector

Growth drivers that influence the entire insurance sectors including

Favorable Demographic Trends

Almost 68% of the Indian population is young, and 55% of the population falls under the age group of 20-25 (considered as the working population) during the year 2020, which is projected to increase beyond 56% by 2025. This showcases that the country has a substantial proportion of a population of insurable young people.

Expanding Middle Class

Projections indicate that by 2030, India will witness the emergence of approx. 140 million middle-income and 21 million high-income households. The expansion of the middle class is poised to significantly expand the growth and demand in the Indian insurance landscape.

The shift towards Digital Channels

An increasing number of customers are preferring towards the digital platform to fulfil their insurance requirements. In 2020, approx. 73% and 62% of customers referred to online platforms to avail of general and health insurance products and services. Significantly, insurance agents are adapting these innovative digital tools, which showcase that 63% are comfortable utilising video calls and over 50% are open to virtual renewals. Although India, as the second largest internet user market, is going to reach beyond approx. 1 billion internet users till 2026.

Pandemic-induced Behavior Changes

The COVID-19 pandemic has enabled an increasing rate of innovative digital solutions, with approx. 67% of agents ease with the digital tools among the customers with different portals and apps after COVID. Moreover, the pandemic has increased the awareness and penetration of insurance in the country, including the health insurance segment.

Government Support

Government initiatives such as AB PM-JAY, the world's largest health assurance scheme, have significantly impacted the insurance sector landscape. More than 230 million beneficiaries have received Ayushman Cards and facilitate over approx. 44 million hospital admissions over a huge network of healthcare providers. Other government schemes such as Pradhan Mantri Suraksha Bima Yojana and Pradhan Mantri Jeevan Jyoti Bima Yojana have made enormous enrolment disbursing claims to millions of beneficiaries. The Pradhan Mantri Fasal Bima Yojana intends to provide potential risk coverage against crop damage and has witnessed massive participation with approx. 276 million insurance applications were received duly in the middle of 2016 and 2033, and thereby, the substantial claims were disbursed to farmers accordingly.

Importance of Insurtech in the Insurance Industry.

It is evident that there are many similarities in relation to goals and implementations of insurtech and fintech, as both dominating industries (the insurance industry and the financial industry) have witnessed remarkable substantial changes. Significantly, the insurtech plays an important role in changing the practice, including how insurance coverage is applied and paid accordingly in different ways-

Insurtech enhances customer experience.

Using innovative technology, customers are now more likely to be engaged in selecting unique and customized insurance coverage, knowing their needs, and accessing customized services instead of travelling to the branch or meeting with a representative. However, the future of insurtech industry is going towards serving self and online dealings, which enables consumers to access their choice of engagement channels.

Insurtech enhance efficiency

Policy seekers and holders can easily do extensive research and explore complex options using innovative tools and insurance apps. Now, people don't need to wait for hours or engage with a representative; insurtech industry has made it easier with quick access to users for the important information they need without getting involved in the traditional process.

Insurtech Emphasizes individuality

Due to the innovative nature of collecting relevant information and data processing, various insurtech industry tools are available, which better enable consumers to help them understand the insurance products in accordance with their true needs. It is not only improving the pricing but also delivers reliable, consistent insurance coverage.

Insurtech ensure flexibility

Innovative insurtech companies facilitate more flexible, customized, short-term, or transferrable plans. Insurtech industry is more likely to provide individuals with more specific insurance coverage to meet their specific needs over a period of time.

Insurtech reduces operating costs.

It is evident that traditional insurance companies work on brick-and-mortar models, which require manual labour. But now, innovative insurtech industry company’s operate in remote locations with their staff engaging with potential customers across the world. The operating model of the online company is likewise the skimmer with less burden.

Insurtech decrease fraud

Insurtech companies are more likely to use innovative data analytics, trend analysis, and machine learning to detect potentially fraudulent activities in case of inconsistencies in data arise. Moreover, big data in the insurtech industry landscape will also be able to discover the potential loopholes which an insurer will seek to close immediately to avoid potential risk.

Which Insurance Areas Does an Insurtech Solve?

Claim Management

Traditionally, the claim management process ensures the manual review of the claim, decides what compensation to award, and then releases the compensation accordingly. Now, the insurtech industry intent is to build an effective and efficient process that automates specific processes and helps identify potential fraud. Established and big insurtech industry companies utilize innovative technology to collect data and aggregate specific data related to specific claims. Large companies are more likely to use automation to pay out a large number of insurance claims with less human intervention.

Underwriting

The underwriting process includes reviewing the individual's profile, assessing the risk profile, and offering an insurance package offer, which includes potential insurance coverage. The information provided to clients also includes different information, such as monthly premiums and what compensation may be entitled under various claims. Such data can be accessed and gathered by means of automation. Even if a client submits crucial information, modern technology uses several data points to make comparisons against historical data, which can continue to help people learn, grow and educate.

Contract Execution

Whether it is related to paying the claim amount, enforcing a different insurance level tier, or closing an individual customer insurance policy that has expired or approved a new customer, it requires a number of contracts to engage with accordingly concerning the insurance policy. When using innovative blockchain technology, smart contracts need to be executed when specific criteria are met. It reduces the human intervention in handling the contract and allows an unbiased, neutral party (technology) to evaluate the specific criteria of a contract and decide the subsequent course of action.

Risk Management

It is evident that big data can be used to collect, gather, analyse, and summarize industry information. It includes processes such as analysing the customer's activities or assessing a wide range of claim types. Depending upon the collected information, insurers are more likely to detect and identify fraud activities, safeguard against uncertain market risks, or easily understand the specific areas of potential risks.

Innovations drive the Insurtech change

It is evident that a wide range of technologies are used in insurtech industry and subsequently growing and changing the way insurance is performed today. Here are some considerable technologies which are used in the insurtech industry sector

AI/ML

Artificial intelligence and Machine learning are widely used in the insurtech industry sector. Artificial intelligence facilitates specific functions that were previously needed with human interaction, but now it is duly performed through innovative technology. Take an example- customers may have preferred previously to interact with the representatives to answer their questions, but now, in the recent era, Chabot's AI tools enable customers to receive immediate help without taking any assistance from humans. Moreover, a part of Artificial intelligence is Machine Learning, which has the innovative capability to extract historical databases and compile them with predictive models. Such models are widely used to distribute vital information. In case the future data is fed in the same model, then it will continue to learn and evaluate how to calculate the effective and appropriate premiums depending upon the demographics or risk profiles.

Automation

In Insurtech industry, the changes depend on efficiency, which means whenever an insurtech customers fill the concerned documents online, then the information will be recorded or stored in a data warehouse and automatically compile the said data to draft a policy ready for a sign. Usually, automation tools are widely used to eliminate manual human intervention at a time when technological tools carry out a process of their own.

Big Data

Big data is supposed to be the collection of huge amounts of database, including a wide range of data, real-time databases, and diverse data sets. Big data technologies enable insurance companies to collect a wide set of relevant data, which is used to analyse customer risk profiles to better understand customers' characters and habits. Moreover, such information can be collected for numbers of customers and fed accordingly for predictive models.

Blockchain

Blockchain is commonly known as cryptocurrency, which is a fundamental component of blockchain technology. It enables an unalterable record keeping of information and ensures security and reliability in the entire information storage. This enables smart contract execution to reside on a blockchain and remain dormant till the specific conditions are not met to release the insurance proceeds, etc.

Drones

Insurtech also depends upon innovative hardware technologies, including drones. It is commonly used to assess properties, evaluate damage accordingly, where it remains unsafe for humans to go, or help in the audit of any site for claim insurance. Drones nowadays are becoming increasingly trustworthy with high-definition photo and video quality, which allows us to assess sites and store images as needed.

Internet of Things

Insurtech innovation also depends on physical innovation, like the Internet of Things (IoT). Although a digital concept, IOT depends on the interaction between physical goods and software.

Future of the Insurtech Industry

The future looks positive for the Insurtech industry, with several regulatory changes that will lead to further changes in the way the industry conducts its business and engages with its potential customers. Moreover, the Life Insurance industry is more likely to be expected and increase by 14-15% annually for the next 3 to 5 years. The IoT scope in the insurance market landscape continues to go beyond telematics (telecommunications and informatics) and customer risk assessment. Presently, in India, more than 110+ Insurtech Start-ups are operating business. Such start-ups are expected to facilitate a major boost to the industry and support India's insurance penetration, which plays an important role in the development of the country's economy. In past years, the Indian government has played an important role in increasing the scope of the insurance sector through implementing various policies and government schemes. The same trend will continue further through various schemes, including the Pradhan Mantri Fasal Bima Yojana (PMFBY), which provides crop insurance, and Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), which facilitates life insurance coverage to Indian Youth through affordable prices. Similar government schemes coupled with Indian demographic factors, including the growing middle class, young insurable population, and growing awareness of the need for protection and retirement planning, will support the growth and upliftment of the Indian insurance sector.