Assessing the market opportunity for insurtech in India

India allowed private insurance companies to start operating at the turn of the millennium. Since then, insurance premiums have grown ~15x for life insurance, from Rs 50k crore to Rs 781k crore for FY 2023 and ~20x for general insurance–from Rs 10k crore to Rs 267k crore for FY 2023, according to a report by BCG and India Insurtech Association. However, we are still early in the growth of insurance in India, especially if one looks at insurance penetration.

Insurance penetration is the ratio of insurance premiums to gross domestic product (GDP). It is an indicator of how well the insurance sector is serving the economy and the society. According to the latest report by Swiss Re, India's insurance penetration was 3.76% in 2020, which is much lower than the global average of 7.23%. This means there is a huge untapped potential for insurance growth in India, especially in the areas of health, agriculture, and microinsurance.

According to an estimate based on current premium and projected growth rate, almost $100 billion of new premium will be created over the next decade–an enormous opportunity for both incumbent insurance companies and insurtechs.

Insurtech, or insurance technology, is the use of digital platforms, data analytics, artificial intelligence, and other innovative solutions to enhance the efficiency, accessibility, and affordability of insurance products and services. Insurtech has the potential to transform the insurance industry by creating new business models, improving customer experience, reducing operational costs, and increasing transparency and trust.

Indian Insurtech got a recent boost when the regulator (IRDAI) stated its vision as ‘Insurance for All by 2047’. The regulator’s aim is that every citizen has an appropriate life, health, and property insurance cover and every enterprise is supported by appropriate insurance solutions. This regulatory tailwind has made India one of the fastest-growing and most promising markets for insurtech in the world.

The opportunity for insurtech can be seen across four key themes:

A) Awareness – The concept of insurance, across different domains, still remains relatively poorly understood across large parts of the population. Despite the growing digital adoption, many customers in India are still unaware or skeptical about the benefits and features of insurtech products and services. Insurtech players need to invest in educating and informing their customers about the value proposition, functionality, and security of their offerings. They also need to build trust and credibility among their customers by providing clear and transparent communication, feedback mechanisms and grievance redressal systems. Insurtechs like Ditto and Beshak are the trailblasers in this theme.

B) Product Offering – Opportunity exists to simplify products (especially usage and parametric products), cover novel risks, improve affordability, and improve personalisation (better use of data to offer more value). This is a vast theme as it cuts across the typical lines on insurance (Life, Health, P&C, Commercial etc.). There is a pressing need to better utilise data to improve underwriting. Enabling infrastructure like ONDC, ABDM etc has made the data available-–Insurtechs have to build the tools to ingest and utilise the data. Insurtechs like HealthAssure, Covrzy, BimaKavach have been bringing innovative products to the market.

C) Contextual Distribution – For years, the industry’s maxim has been that insurance is sold not bought. In the digital age, this no longer needs to be the case. Insurance can now be embedded at the point of sale and made relevant to the transaction taking place. Insurtechs like Cover Genius, Ensurdeit, and Riskcovry have been in the vanguard of this theme.

D)   Delightful Experience – The changing preferences and expectations of the Indian customers, especially the millennials and Gen Z, have created new challenges and opportunities for the insurance industry. These customers are looking for more personalised, convenient, and transparent insurance solutions that suit their lifestyle and needs. They are also more willing to share their data in exchange for better services and rewards. Insurtech can leverage data-driven insights and advanced analytics to offer customized products, dynamic pricing, seamless claims settlement and enhanced customer engagement. The opportunity in Claims is especially large – areas like requiring customers to submit paper bills, wait weeks for reimbursements and co-ordinate between the service provider and insurer are ripe for disruption. Insurtechs like Vitraya Technologies, GramCover have taken strides in this area.

The growth prospects of insurtech in India is promising. The tailwinds are persuasive - driven by progressive regulations, increasing consumer affluence and heightened awareness.  The next decade will bring significant growth in the non-life/general insurance sector and continued growth on the life insurance side.

The under-penetrated health insurance segment, the nascent commercial insurance sector and opportunities in agricultural insurance represent a lucrative opportunity to improve the lives of Indians. The integration of advanced technologies and the adoption of a customer-centric approach are pivotal in enhancing underwriting capabilities, streamlining claims management, and fortifying fraud detection mechanisms.

(Shwetank Verma is the Co-founder and Managing Partner at Leo Capital)