Bima Sugam

     

Sanjiv Singh, Head, Marine & Specialty lines, GI Council

India is the 10th largest insurance market in the world, and it's poised to be 6th largest insurance market  in the world by 2032, ahead of Germany, Canada, Italy and South Korea. Given the push by regulator on penetration and a lot of regulatory reforms it is expected that there will be rapid growth of business both in retail as well as corporate and given the status of Indian economy which is growing very well and expected to grow at more than 7% in the coming years, the dream is very realistic.

When we think of Indian market we think of its population and covering entire population requires a lot of efforts, use of technology, major initiative by the intermediaries and distributors and therefore from the current 1% of penetration the global average of over 3.9% appears to be a challenging task.

However, the current series of reforms across all areas of insurance activities, the use of innovative products, sustainable pricing and state of art claims management are driving the industry to a very productive ecosystem of customer friendly environment

The recent initiative by IRDAI Bima Sugam is perceived to be a big game changer in the general insurance market development. It is a revolutionary step with ambitions of becoming the largest online market for insurance products and services which has not been practiced anywhere in the world.

Going by the diversity and the size of India's population it may prove to be quite successful and a model for other developing economies. It will facilitate convergence of all stakeholders and insurance services in a single place.

The salient features of be Bima Sugam as available provisionally in the public domain are as under:

  • Bima Sugam will connect and empower all Insurance Stakeholders
  • Bima Sugam would be a revolutionary digital platform (an Amazon-like one stop digital platform) that innovates, develops, and integrates advanced technologies to automate and digitize the processes for multiple stakeholders. The stakeholders include insurance companies, policy holders’, intermediaries, insurance repositories and external data sources etc.
  • All insurance requirements, including those for life, health, and general insurance (including motor, travel, etc.), will be met by BIMA Sugam
  • The online platform, backed by the regulator, the Life Insurance Council and General Insurance Council will allow individuals to fulfill all their insurance needs, right from buying the policy to claim settlement and much more.

 Though it will take some time to crystalize the structure and functions of Bima Sugam and more details would be available soon after detailed deliberations currently going on between stakeholders it is worthwhile to look at the Swiss Re Sigma 4 2022 report which also feels bullish on Indian Insurance sector.

As per Swiss Re, “India’s insurance market poised for rapid growth India is one of the fastest growing insurance markets in the world. In terms of total premium volumes, it was the 10th largest globally in 2021, with an estimated market share of 1.9%, and the second largest of all emerging markets. We forecast that premiums will grow by an average of 9% per annum (in real terms) over the next decade, stronger than the 7.5% annual average of 2015–2021. At this rate, India will be the 6th largest insurance market in the world by 2032, ahead of Germany, Canada, Italy and South Korea. Our projection is based on expectations of strong economic growth, rising levels of disposable income, India’s young population, increased risk awareness and digital penetration, and regulatory developments.

At 1%, non-life insurance penetration (premiums as a percentage of GDP) in India last year was significantly below the global average of 3.9%. Growth in the non-life sector will be driven by demand for health covers, with people more aware of health security post COVID-19, and strong support from a government-sponsored mass health program (Ayushman Bharat). Compulsory motor third-party insurance will also grow rapidly as India’s middle class continues to expand and buy more cars. 4

India will be one of the main drivers of global insurance industry growth over the next decade. Non-life penetration is significantly below the global average. The government raised the level of foreign direct investment (FDI) in domestic insurers to 74% from 49%, and there are expectations that the level will increase to 100%.

The increase to 74% already allows foreign insurers to further strengthen their foothold in one of the fastest growing insurance markets in the world, with controlling stakes. The move will also facilitate greater access to capital, underwriting know-how and product innovation for the country’s insurers.

Star Health and Allied Insurance, the largest private-sector health insurer in the country listed in December 2021,17 making it the fifth private sector insurer to IPO after SBI Life Insurance, HDFC Life, ICICI Lombard and ICICI Prudential. Public listings will improve public disclosure, corporate governance, and valuation. The insurance sector is highly competitive and is already witnessing M&A activity. Additional FDI inflows, IPOs and improved corporate valuations will likely further accelerate M&A activities in the sector. The digitalization of Indian insurance market goes beyond telematics and customer risk assessment. A large number of digital platforms have emerged over recent years, offering a wide array of services, including insurance purchases. There are currently more than 110 InsurTech start-ups in India. Funding in Indian Insurtech rose from just USD 10 million in 2016 to USD 800 million in 2021, accounting for almost 6.0% of the total global funding in the sector over the same period. Policybazaar, Digit and Acko from India are among few InsurTech companies globally that had crossed the USD 1 billion valuation mark by 2021. “

General insurance is the sunrise industry with a great potential to unleash cover for all, reduce protection gap, offer employment and lot more opportunities to all stakeholders. It is poised for revolutionary and unprecedented progress in the days to come.