The insurance industry in India is expected to keep growing in 2016, according to experts and analysts. They feel that the government’s Make in India initiative is going to fuel the next phase of growth in the industry. All in all, the industry will keep making positive contributions to India’s growth story.
In FY15, the insurance industry witnessed a growth rate of 12-13%. The industry is expected to outperform itself in FY16, taking the growth rate to 15%. A major driver of the increased growth rate is the government’s policy initiatives, which have renewed confidence in the Indian economy.
The Make in India campaign, investments in infrastructure, smart cities initiative, and increased consumption will result in higher number of projects that will be launched, helping the insurance industry grow. The initiatives will result in increased travel within and outside the country, leading to higher travel insurance policy sales. The Make in India campaign, in particular, will result in an upsurge in the manufacturing sector, which in turn could be advantageous for property and cargo insurance.
There is expected to be revisions this year to the pay scales of government employees, which would increase their purchasing power resulting in the higher car and travel package sales, among others. This again would lead to higher auto, travel, and life insurance sales.
Foreign insurance companies that have joint ventures in India will look to increase their presence in the country now that the foreign direct investment (FDI) cap has been raised to 49%. Companies in the insurance industry, which is a capital-intensive business, will look to take advantage of the FDI increase to grow their presence.
Increased customer awareness, the rise in incidences of diseases, and regulatory changes would drive the health insurance sector. More people will be depending on their insurers as the source of credible health care information for better decision-making.
Near about 9.5 million vehicles in India are uninsured, according to one estimate, despite vehicle insurance being mandatory under the Motor Vehicles Act. Any initiative to insure these vehicles will result in a big boost for the motor insurance sector.
Increased technology spending
Most Indian insurers are expected to increase their IT budgets in 2016. They are expected to spend around Rs. 141 billion on IT products and services alone, a 9.6% increase over 2015, Gartner Inc reports. Indian companies are relying on digitalization to grow their businesses domestically. The stress is on their analytics capabilities.
However, insurance companies remain unsure of how to use technology effectively. A recent report showed how nearly 70% of customers globally did not have a happy customer experience in their dealings with insurance companies. Another report pointed out how a combination of sensor technology, Big Data analytics, and communicating networks could allow insurers to predict customer demands and risks more precisely.
The widespread adoption of the Internet of Things (IoT) due to the low cost of sensors, improved communication methods, and increased data processing power is enabling insurers to identify customers’ needs and risks. For instance, customer health risks can be more accurately predicted using wearables. Services will go from being customer-initiated to insurer-initiated.
Insurance policies, especially auto insurance policies, will shift towards being usage-based. The shift will allow insurers to enhance their claim handling abilities and enable them to do better customer segmentation. Pay as you drive, pay how you drive, and manage how you drive models will soon become the norm.
Insurers will begin gathering data from social media and other sources to make claims processing quicker and eliminate fraud.
In 2016, non-traditional players could be seen entering the insurance space. Their data mining power, capital availability, and large customer bases can be leveraged in the insurance industry. They are joining hands with other players in joint ventures, alliances, and partnerships to enter the arena.
The Bottom Line
This year will be full of disruptions for the insurance industry. Sweeping new changes can be expected. Insurers will do well to keep their ears trained for innovations that promise to change how they work.