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Evolution of the Insurance Sector During the Pandemic

Feb 3, 2022 8:22 AM 4 min read

The Indian insurance industry’s landscape has changed in a big way due to the ongoing coronavirus pandemic. Due to the growing awareness towards the need for protection, not only has the penetration of insurance products increased but there also has been a shift in product mix. Since the inception of the virus, the business of the companies has increased by leaps and bounds. 

Many of us know a middle-aged uncle who pushes us into buying insurance products but for the very first time customers have approached them, banks, and insurance company branches to meet their insurance needs aptly. This has transformed the product from being a push to a pull product causing robust demand for health and life insurance-related products. 

LIC- The Lifeline of Public Sector 

Among the life insurers, Life Insurance Corporation (LIC) is the sole public sector company. They hold more than 70% market share in terms of policies. LIC recorded a 10% growth YoY for 2021. In April 2021 alone, LIC booked profits worth ₹3,161cr ($422.9m) on investments. They have managed to procure 2.1 crore new policies and settled 2.28 crore claims despite such harsh times. Customers have shown immense trust in the insurance giant of the Indian market.

LIC has recently announced that it will be coming up with an IPO, which is India’s biggest ever initial public offering. The implication of such a move is expected to have positive implications as the largest insurer in the country has to abide by SEBI guidelines which will increase their transparency and accountability for the future shareholders, the policyholders and the general public. 


The Private Sector Giant 

HDFC Life Insurance Company Ltd ( HDFC Life ) is the largest private insurer in India with an approximate market share of 23.3% as of 2021. It has a multi-channel network that consists of insurance brokers, bancassurance partners (mainly HDFC Bank), and direct channels. Their sales rose 34.87% to ₹10,056.71cr ($1.3bn) in the quarter ending in September 2020 as against ₹7,456.87cr ($997.8m) in September 2019. Later, they closed the year 2020 at a 81.37% growth YOY in revenues in the December 2020 quarter at ₹21,129cr ($2.8bn). HDFC Life with its strong bancassurance model was a big beneficiary of the trend in which customers actively visited their bank branches to purchase insurance-related products.

Although their profits fell in the June 2021 quarter, this was a courtesy of the Second Wave which led to a rise in the number of death claims. This fall in profit is inconsequential but also it is an opportunity to give a better death-to-claim ratio in comparison to competitor companies to create a better trust factor and, in turn, reapi long-term benefits.

The company has acquired Exide Life recently due to their significant presence in tier 2 and 3 centres and South India to meet up the growing demand. 


Startups Leading the Change

Although big insurance companies are posting higher profits and increase in customer base regularly, still only a small fraction of the Indian population has access to insurance and these digital firms are being crucial in bringing their services to the masses. Currently, 110+ insurtech startups are operating in India. The Indian insurtech space is hugely dominated by multi-insurance players like Policybazaar, Coverfox, and Renewbuy. Newer players like Acko and Digit Insurance have also emerged due to the increase in funding to the startups providing general insurance. These startups promise to deliver products offering adequate cover using AI algorithms and data processing capabilities. The insurance sector is highly dependent on middlemen. These applications eliminate brokers, reduce paperwork and fraudulent practices at a lower price making them attractive for buyers. Insurtech startups possess the capability to disrupt the highly unpenetrated insurance market owing to the accessible internet connection at affordable prices. One of the biggest steps taken by an insurtech startup is Policybazaar applying for IPO

Government policy aid aims to support the sector. One such instance has been an increase in FDI from 49% to 74%. An increase in foreign investment is synonymous with further growth in the sector. More FDI encourages more insurance players to have their operations in India that leads to an increase in capital for the sector further promising innovation and an increased mix of products.


Road Ahead

India, as a country, is still in a very nascent stage in terms of insurance penetration. Out of the 1.3 billion population, there is barely 1% penetration in non-life insurance products and 4% overall. The insurance sector has grown exponentially recently but it needs explosive growth to meet up with the demands of India’s ever-growing population. 

The pandemic has forced companies to keep up with customer needs. Consequently, some companies have been working on an ideal scenario of a hyper-personalised product that ensures a person's future. The increase in the size of the global middle-class population, higher incomes, inflation in healthcare and education, and an aware young population conscious of their retirement planning all promise dynamic growth. 


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