National distinctions in the design of insurance products are becoming less prominent. There is today a lot of potential for financial regulators to share technical knowledge more seamlessly, as for example already takes place between the financial regulators of the UK and India. Transformation and reform of the financial system is a long process that takes patience. But now the insurance sector in India is set for a second phase of strong growth, and insurers stand ready to do their part. These were the main themes from the recent ‘India Day’ event in London that brought together leading insurers and public figures in industry from India and the UK.
In the conference there was a rich discussion about opportunities for improving India-UK collaboration in financial services, about the pace of change and the current ambition and direction coming from India’s government and industries.
Speakers included Piyush Goyal, Minister of Commerce & Industry and Railways; Lord Mayor of the City of London Peter Estlin; British High Commissioner for South Asia Crispin Simon, the UK’s Minster for Investment Graham Stuart and business leaders such as Vibha Padalkar, MD and CEO HDFC Life Insurance; Bill Winters, Group CEO Standard Chartered; Mike Wells, Group CEO Prudential/ICICI Prudential; Bruce Carnegie-Brown, Chairman Lloyds of London; and Ramaswamy Narayanan, CEO General Insurance Company (GIC) Re.
Insurance at an inflexion point
Mike Wells of Prudential/ICICI Prudential said that as a player in the market for 20 years, there’s always been a view that India is a key market for growth. He highlighted how India’s US$95 billion annual life insurance market has doubled in the last six years, and it is forecast to double again in the next four to six years, or grow four-fold in the same time period, depending on which forecast you favour.
“We see directionally improving shifts in regulation, as well as large shifts in the consumer uptake [for insurance],” commented Mike Wells.
“External experts see the demand growing, and with many successful partnerships, government policy and great platforms, all of this is going in the right direction,” he said.
He added that, compared to the global average figure of 6.3% for insurance penetration (premiums as a percentage of annual GDP) India is still approximately two percentage points below the developed markets, with huge growth – and social benefits – still to come.
“India is today at an inflexion point,” commented Vibha Padalkar of HDFC Life. “There were some changes in practices, worldwide challenges such as raising the transparency of products [and consumer understanding]….Compared to China, India has ticked all of these boxes in terms of this ‘clean-up’, so the only way is up.”
Positive consumer mind-set and regulatory environment
Vibha Padalkar commented that India’s life insurance penetration rate has been in slight decline in recent years, which can be attributed to the way life insurance was being sold, as a savings-led or investment-led market.
“But I am still very optimistic, as we look at the movement slightly towards insurance as a ‘pull’ from a ‘push’ product….When the average Indian looks at risk, towards the fact that he might lose something, he will now look to insurance. That is a huge shift [of mindset] and it is growing. The insurance consumer is now very ready for the market to grow.”
Seen in the global context, the annual 15% growth in general insurance in India is hardly replicated anywhere in the world. Then consider that globally, not just in developing markets like India, almost all countries are under-insured and suffering the ‘protection gap’ (defined as the gap between the current insurance coverage and the desired insurance coverage, from the point of view of optimising protection of people, businesses and economic resilience). It’s possible to see the huge long-term potential for India’s insurance sector.
“The big value for India is that every single percentage point improvement in insurance penetration will have a disproportionately positive effect on the economy and stability, more than China for example,” commented Mike Wells. “This shows the power of risk sharing.”
There was agreement in the conference that the current moves by the regulator IRDAI, for the sandbox environment in product testing and flexing, are going to be very positive. It is a move that will give a big boost for product innovation, particularly in the area of preparing insurers for working with digital ecosystem partners, such as mobile phone providers, automotive companies, property-sector companies and others.
Describing the success of HDFC’s collaboration with Bhati Airtel, offering life insurance bundled to a prepaid recharge, Vibha Padalkar of HDFC Life said the opportunity for these types of “ecosystem” partnerships is huge.
“These new types of relationships become a win-win if it helps us and it helps us to create a win-win for the consumer,” said Vibha Padalkar. “The question for the ecosystem is about the use of data and analytics,” she added. “How to get that full 360-view of the customer, looking at both the traditional touchpoints for insurance, and the new touchpoints such as social media? How to give the consumer a seamless experience?”
“We’re working to connect up those dots, for example when a customer is commenting on a product or searching for a product. It is hugely exciting and I want to stress, this is not about gimmicks. It’s about reimagining insurance….A lot of things are evolving.”
There was a discussion in the meeting about how insurtechs and start-ups are having an impact in the sector, tending to enable the current business model. But this doesn’t mean the delivery model – especially for single-premium products such as non-life insurance – won’t be transformed in future.
“If we compare other markets such as the UK, the biggest disruption to date has been in the distribution chain rather than the underwriting,” commented Mike Wells of Prudential/ICICI Prudential. “I see it also starting in India….But the problem for the incumbents is that, as we tend to acquire the start-ups and challengers, we tend to convert them to heavy and slower entities, because we are heavily regulated ourselves. I expect to see a lot of this activity in India.”
Minister Piyush Goyal noted in his keynote address the deep opportunities for Indian companies and the UK companies to work together and make the most of current synergies in financial services and fintech.
“The close relationship between the governments and peoples of these two great countries is truly an opportunity to build a bigger slice of the pie.”
“Traditionally every citizen in India has felt looked after by the government. Now is the time for financial services to take this to the next level,” commented Minister Piyush Goyal.
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