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Direct sales threatening brokers and agents in India – study

Sept 27, 2019

The rise of the direct sales channel is poised to weaken the traditional dominance of brokers and agents in the Indian general insurance industry over the next three years, a study by GlobalData has found.

The report, titled ‘Strategic Market Intelligence: General Insurance in India - Key Trends and Opportunities to 2022’, reveals that the share of direct sales in terms of total direct written premiums (DWP) will increase from 37% in 2017 to 42% by 2022 – at the expense of brokers and agents.

In 2017, DWP of India’s non-life insurance market was valued at INR1.1 trillion (US$17.1 billion), the report said. Agents held the largest share at 41.1%, followed by direct sales at 36.7% and brokers at 22.2%.

Direct sales recorded the fastest growth, increasing at CAGR of 21.0% during 2013 to 2017, mainly driven by a rise in online purchases. By 2022, DWP based on direct sales is projected to be valued at INR848.3bn (US$12.0bn).

In 2022, the study predicts that direct sales will be the largest channel with 42.4% of DWP, with agents shrinking to 38.7% and brokers down to 18.9%.

“Rising online purchase options, including social media and mobile-based payment applications, enable a wider scope for direct sales in general insurance products,” commented Sangharsan Biswas, senior insurance analyst at GlobalData. “Growing smartphone and internet penetration created a wider reach resulting in varied price points and product offerings. Insurers are deploying technology to further drive the growth of direct sales in India. They are now using artificial intelligence-based customer interface solutions such as chatbots for product queries, sales, and payment reminders. This has contributed to better customer relationship management, thereby supporting growth.”


Upto Rs 5 lakh insurance free for Uber riders in India

Sept 26, 2019

The moment you board an Uber vehicle starting Wednesday, you will automatically be entitled to an insurance coverage of up to Rs 5 lakh, the ride-hailing giant said on Wednesday.

In case of an accidental death or disability, Uber riders will be able to claim a maximum of Rs 500,000. They will be able to claim up to Rs 200,000 for accidental hospitalisation, including maximum OPD benefit up to Rs 50,000 for per passenger free of charge. Uber has partnered with Bharti AXA and Tata AIG for the insurance scheme which will cover all riders in cars, autos and two-wheelers.

"We are launching rider insurance for riders across our all modes transport which means cars, auto and moto (two wheelers). This insurance we are offering is completely free of cost and it is automatic. The moment you enter an Uber vehicle your insurance cover starts till the time your trip finishes," Pavan Vaish, Head of Central Operations (Rides) for India and South Asia, told IANS.

To report an accident to Uber, riders can go to the "Past Trips" section of the app and provide feedback on the ride. To navigate further, riders need to go to the menu and select "Help", then "Trip and Fare Review" and then "I was involved in an accident". Uber's 24x7 support team will then reach out to the rider and coordinate with the insurance partner to take them through the claim process.

"For smooth experience we have made the entire process cash-less and one needs to select the ride in the app, and fill a form with details. Soon after this, our team will get in touch with you for assistance," Pavan added.

The company recently rolled out free insurance for over 450,000 drivers registered on its ride-hailing app in India. The policy includes accidental death, disablement, hospitalisation and medical treatment.

The coverage offered includes Rs 5 lakh in the event of death, up to Rs 5 lakh for permanent disability, up to Rs 2 lakh in the event of hospitalisation, with a sub-limit of up to Rs 50,000 for outpatient treatment.


Scooters, motorcycles, cars insurance premium increased from 16th June

June 12, 2019

Motorcycle and scooter sales have already been hit by the on-going slowdown in the auto industry and now increased third-party insurance rates may further dampen consumer sentiments. Increased third-party insurance rates were announced by Insurance Regulatory and Development Authority of India (IRDAI), a move that will help insurance companies to manage rising costs related to third-party claims settlements.

Revised third-party insurance rates will become effective from June 16, 2019. Anyone buying a new two-wheeler after June 16 or renewing their third-party insurance after this date will have to pay the increased rates.

However, IRDAI seems to have looked into consumer interests as well, as new rates are not too high. Revised rate for 75 cc to 150 cc two-wheelers, which is the largest segment, is Rs 752, which is just 4.44% more than Rs 720 earlier. New rate for two-wheelers below 75 cc is Rs 482, which is 12.88% more than Rs 427 earlier.

The highest increase in rates is for two-wheelers in the range of 150 cc to 350 cc. Third-party insurance rates for these bikes are up 21.11%, from Rs 985 earlier to Rs 1,193. The only segment spared from increased rates is above 350 cc segment.

At Rs 2,323, there is no change in third-party insurance costs for motorcycles exceeding 350 cc. Such bikes are fewer in numbers, so mathematically they have a lower probability of being involved in an accident.

IRDAI has also announced third-party insurance rates for electric two-wheelers, which are gaining momentum across the country. Rates for electric two-wheelers are based on their engine capacity, expressed in kW. For e-scooters below 3kW, the rate is Rs 410. For 3kW to 7kW, rate is Rs 639 and for those between 7kW to 16kW, rate is Rs 1014. Any electric two-wheeler above 16kW will be charged Rs 1975.

Federation of Automobile Dealers Associations(FADA) quote on Insurance regulation price hike – “The Automobile Industry is already going through a difficult phase with low sales & subdued customer sentiments. This sudden change in price hike of 3rd party insurance will again dent the pace of sales, specially the 2W category which is already reeling under price hike for mandatory 5 yrs insurance and ABS/CBD implementation.

We feel IRDAI should reconsider the price hike, as this increase would significantly impact the sales volume also affecting the insurance business. However, as the report says the proposed 15% discount on third party insurance on Electric Vehicles (private cars & two wheelers) is a welcome move through the sales of such vehicles are very minuscule.

Going forward, we would require substantial support from all quarters and specially the insurance industry to help the automobile industry to recover from the slowing demand affected by the uncertainty around NBFC and the previous regulation passed for collecting three and five years of premium for new cars & two-wheelers respectively.” – said Manish Raj Singhania, Hony. Secretary – F A D A.


55% Indians still buy insurance via agents

June 11, 2019

In India, insurance continues to be a push product, mostly due to its complex structure that is difficult to understand. No wonder then that a recent report by PwC India Pvt. Ltd, a consultancy firm, done along with the Confederation of Indian Industries (CII) found that even today about 55% Indians buy insurance products from agents or brokers.

The report, titled Competing in a new age of Insurance - How India is Adopting Emerging Technologies, said convenience plays a big role when it comes to buying insurance and 41% stated this to be the reason for opting a particular mode of purchase. Two hundred customers, agents and insurers were interviewed for the report.

“The insurance sector is one domain where a lot of human interaction is needed—not only for the fact that insurance is a push product, but also that it requires a lot of solicitation as it is a long-term commitment. Even in today’s time, almost 95% of online sales of products such as term plans, critical illness plans and Ulips (unit-linked insurance plans) is assisted by call centre executives," said Rakesh Wadhwa, chief marketing officer and executive vice-president, strategy, Future Generali India Life Insurance Co. Ltd.

Insurance penetration, which is measured as the ratio of insurance premiums paid and GDP (gross domestic product) of the country didn’t see a drastic jump in the last 17 years. According to the report, penetration increased from 2.17% in 2001 to only 3.69% in 2017. On the contrary, global penetration currently stands at 6.13%. “The overall penetration is dragged down by general insurance. Life insurance penetration is closer to the global average. Within general insurance, the SME segment in commercial insurance, and the middle income segment (excluding HNIs and low-income groups) in the personal insurance side is lowest in terms of penetration," said Abhishek Bondia, principal officer and managing director,

Life insurance is still seen as a tax-saving instrument, but it rarely makes it to the list of key financial planning tools. “To increase the penetration in the country, it is critical to achieve the objectives of financial inclusion. The need is to run programs like the mutual fund industry did to broaden its base," said Wadhwa.

Intermediaries continue to remain important to the sector but experts said there is scope for traditional channels to adopt newer ways to make the buying process simpler and faster. Bondia said the opportunity to digitise the processes is abundant even in the traditional methods of selling. “For example, once an individual identifies a particular plan with an agent, the entire buying process should be digitised. A policyholder should be able to fill the proposal forms, get assets inspected, and make payment digitally," he said.

Most insurers have apps to make the purchase and claims settlement process easier, but the adoption of these seems to be low. Though smartphone adoption in India has grown at a rate of 19.43% during the period 2015–18 and is expected to grow by 7.80% by 2022, in the case of insurance, the adoption of apps is still at a nascent stage, said the report. “An app needs to have high-frequency usage and exclusive benefits, otherwise it won’t be a good idea to push app downloads where the usage gets limited after a certain point of time," said Wadhwa.

Every insurance product comes with several inclusions and exclusions that are difficult to comprehend by most end-users. According to Bondia, the user experience across various distribution channels is not designed for unassisted sales. People who are accustomed to simple tools like WhatsApp are unable to negotiate with complex insurance apps, he added.

The report said 67% customers prefer to leverage aggregators or online platforms which enable them to make calculated and informed decisions by comparing products. “The regulatory body hasn’t given permission to insurance companies to compare products on their own platforms. Hence, independent platforms provided by web aggregators fulfil that need for comparison and help customers make their own decisions," said Wadhwa.

While the government and the insurance regulator have been taking significant steps to harness the market’s potential, a lot more needs to be done to widen the reach, said experts we spoke to. A massive awareness program talking about the benefits of life insurance is needed to build credibility among customers, said Wadhwa.


Simple & cost-effective insurance soon for homeowners and firms

May 24, 2019

An IRDAI working group has recommended the standardisation and simplification of fire insurance covers for homes, offices, commercial establishments and micro, small and medium enterprises.

The working group's report released by the IRDAI on 20 May 2019 contains several recommendations keeping the target market segments and the perils they encounter in focus.

Three variations of a standardised simple fire insurance cover

The working group has recommended a single product for fire and all allied perils for dwellings of any value. It has suggested that all existing products with varying terms and coverages should cease to exist.

Three variations of this standardised and simple fire insurance cover have been proposed. The first variation which would be the basic and the simplest with highly relaxed terms would be for homeowners.

A slightly more refined version would be for micro commercial establishments with a risk value up to INR50m ($0.715m).

Commercial risks with value at risk from INR50m to INR500m would be offered a moderated version of the existing product.

Terms and conditions, coverage and add-ons cannot be changed in the new product

The product in all three variations would be standardised and worked out such that there would be no possibility to change its terms, conditions, coverage and add-ons. There would be no provision for offering any discount to opt out of any coverage of the product. All cat perils would be covered in the standard base product itself. Home insurance penetration in India is just about 1%. Hardly 3% of houses in India are insured at present.

All perils, especially Nat CATs would be covered by default

At present, cover for many CAT perils does not form a part of the base product and is sold as an add-on following demand from a customer or a sales push. Earthquakes which have caused large economic losses in various parts of the country are not provided for in a default cover in the fire insurance policy and has to be opted for by express demand according to the working group report.

Vulnerability to catastrophes

Around 60% of Indian subcontinent landmass is vulnerable to earthquakes and other natural catastrophes and at least 38 Indian cities lie in high-risk seismic zones. Furthermore, most Indian cities are densely populated and do not adhere to the best architectural layout standards. Also, a majority of both residential and commercial premises do not comply with earthquake and flood resistance safety guidelines. These aspects make them highly vulnerable to natural and man-made perils.

In the existing product, all contents are insured for only one year. The report recommends coverage for a longer term. The panel also recommends that the insured value of apartments in high rise buildings be equivalent to the total saleable price of the unit based on the rates published by the state government concerned.

The policyholder will now have the option to increase this rate if the actual rate is higher than the ready reckoner, but not reduce below it.

Catastrophe bonds recommended

The working group has recommended that the “government funds Nat CAT losses and then buy a reinsurance solution to reduce the volatility of their outgo. There are many countries where Nat CAT losses are funded by government. Two potential reinsurance solutions for government could be: parametric insurance or capital market solutions via catastrophe bonds”.

Low awareness and confusion about products the main reason for low penetration

The poor fire insurance penetration of homes/ dwellings and other real estate properties in India is primarily due to overall low insurance awareness and confusion in the minds of customers due to multiplicity and lack of clarity of the products in the fire category.

Stakeholders can send in their comments on the report to the IRDAI by 7 June 2019.

Source: Asia Insurance Review

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