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Indian insurance: from indemnification to risk management solutions

Posted by - Gopal Balachandran, Chief Financial officer, ICICI Lombard General Insurance Company Limited
July 30 2018

The Indian general insurance sector has moved from pure insurance provider role to an advisor who helps build sustainable businesses, unfettered by any adversity. No surprise, then that the sector is expected to evolve into one of the leading contributors to economic growth in the next decade.

The Indian insurance industry is a gold mine of opportunities with tremendous business potential. The sheer volume of opportunities waiting to be exploited makes it a lucrative sector – from a business perspective as well as from an economic growth angle.

India is the second most populous nation in the world, however it accounts for under 2% of the world’s total insurance premiums. For a nation on the cusp of being a superpower, insurance is a sector which can shape the nation’s destiny by superior channelizing of insurance savings and ensuring uninterrupted growth even during adversities and calamities.

The insurance sector, today is heavily under-penetrated. Imagine being able to reach out to every single Indian. The possibilities are truly endless. The future of the industry looks bright with a higher disposable income, young insurable population, and the growing awareness of the need for protection.

The market opportunities are immense and this sector in the next decade will evolve to become one of the leading contributors to economic growth, from a global perspective. The country happens to be one of the top 20 markets in the world in terms of insurance premium volume.

The potential of the Indian insurance industry to have an exponential growth in the coming years is evident from superior distribution methodologies and channels, greater awareness of the benefits of insurance amongst the masses, tax benefit plans by the government and technological initiatives by the sector.

A spate of innovative covers and advisory services leading to comprehensive coverages being provided to corporates and individuals against a plethora of diverse and disruptive perils also reflects this unrealised potential.

Imagine being able to purchase a travel insurance policy, at just the click of a button, whilst starting your travel journey and being able to do it at extremely affordable prices too. This is just a speck in the ocean with respect to the endless growth opportunities the sector has witnessed and will continue to witness in India.

People typically associate insurance companies with indemnifying for medical bills, when admitted to a hospital. How would it be if somebody ensured you always stayed fit and healthy and never went to a hospital at all?

In place of paying hospital bills, what if somebody reimbursed your yoga class fees or gymnasium charges? This defines the new age general insurance sector – which has a strong connect with the youth and new modern thinking.

People increasingly think of ways and means to save tax. Tax benefits to citizens for insurance purchased has given a big fillip to the industry. Insurance premium payments constitute admissible deductions from income for tax payers. The sector today can provide covers to the taxpayers, which would not only protect them but also help them reduce their taxation burden.

People, over the years, would continue to witness greater disposable incomes, either from business, profession or their salaries. This would be invested in assets, thereby contributing to the need for adequate insurance covers for asset protection.

Catastrophes have always been a big risk factor for any nation as they can prove to be an obstacle to growth and cause disruption. However, the insurance industry offers the right set of covers to protect an individual against damage to property, through uniquely devised home and catastrophe insurance covers.

Businesses are protected through loss of profit covers which ensure that they are compensated for business interruptions on account of catastrophes.

On the corporate side too, the insurance industry ensures robust growth for businesses through protection of assets and indemnification for business interruption, thereby ensuring sustained economic growth as well.

The Indian non-life insurance sector has transitioned from being an insurance provider to a risk management solutions provider for corporates. The focus today has shifted from indemnifying to helping build sustainable businesses, unfettered by any adversity.

The sector provides value added risk management solutions whereby businesses are advised on mechanisms which can be adopted to foresee risks and plan for them today. The sector is playing a proactive role in terms of advising businesses on effective risk management practices, which would ensure that the business continues to stand stable.

Even from a claims indemnification perspective, the sector has introduced several digital-based initiatives such as real time inspection of loss by customers themselves, artificial intelligence being used to spool critical claims-related information to expedite the speed of processing standard claims, drones being used for inspection on a pilot basis and similar path breaking customer-focused innovations.

A spate of new regulations such as The Companies Act have placed greater focus on transparency and accountability, with greater responsibilities being placed on the Directors. With growing litigation, class action suits and stringent regulations being the order of the day, the general insurance sector has innovated and devised the Directors and Officers (D&O) liability insurance covers which protect the organization’s Directors against malicious litigation and other risks, thereby ensuring that the company is not dented on account of unforeseen events.

A new emerging and disruptive risk is that of cyber threats including ransomware incidents. Both people and organizations have suffered crippling loss of critical data and information on account of these incidents. The general insurance sector today is providing covers which would help protect and indemnify organizations and individuals, in the eventuality of the threat materializing – again a pivotal step to building sustainable businesses.

The focal point of the sector these days is being proactive and not reactive - it is one aspect to compensate organizations if a peril such as a fire or an accident occurs and another aspect altogether to ensure that a peril does not occur by advising on the right set of loss prevention and minimization programmes that the insured organization can adopt.

The end of one an era is always the beginning of another.

It is a virtual certainty that the Indian insurance industry is poised to continue its double digit growth with improved penetration of the sector in times to come and through effectively undertaking the role of being a catalyst in the growth story of the nation.

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