Why India’s Insurance Sector Is The New Focal Point? 13% Rise In Premium Collection For Non-Life Insurance Companies In FY24, Maternity Insurance Demand On The Rise Balancing Zooming Costs; Comparing India’s Insurance Sector With Developed Nations, Where Are The Gaps?
The insurance sector has emerged as a new focal point, witnessing a significant 13% increase in premium collection for non-life insurance companies during the fiscal year 2023-24.
According to data released by the General Insurance Council, a total of 42 general insurance companies collectively amassed a premium income of Rs 2,89,738 crore during this period, thus, marking a considerable rise from the previous year’s figures.
In the preceding fiscal year, the non-life insurance industry had collected Rs 2,56,894 crore in premiums.
Breaking down the numbers, 35 general insurance firms reported a strong 14% increase in their premium collections, amounting to Rs 2,45,433 crore in the fiscal year 2023-24, compared to Rs 2,14,833 crore in the previous year.
Additionally, the data revealed that five standalone health insurers witnessed a substantial growth of 26%, with a collective premium collection of Rs 33,116 crore during the fiscal year, up from Rs 26,244 crore recorded in the preceding year.
However, there was a notable decline in premium collections for the two state-owned specialized PSU insurers, namely Agricultural Insurance Company of India Ltd and Export Credit Guaranteed Corporation of India. Their combined premium collection of Rs 11,189 crore in the fiscal year marked a 29% decrease from the Rs 15,817 crore collected in FY23.
Looking ahead, the future appears promising for the sector in the current financial year, with major reforms slated to be implemented post-general elections.
The Crucial Gaps
When comparing the insurance sectors of developed nations with that of India, one sees striking divergences and intriguing parallels.
For example, in developed economies such as the United States, the United Kingdom, and Germany, the insurance industry boasts a mature and highly sophisticated market characterized by strong regulatory frameworks, extensive product offerings, and significant market penetration.
Meanwhile, India’s insurance sector, while rapidly evolving, struggles with the challenges of expanding financial inclusion, enhancing consumer awareness, and regulatory complexities.
However, despite these disparities, both contexts exhibit a shared trajectory of adaptation to technological advancements, changing consumer preferences, and shifting regulatory paradigms, albeit at varying paces and with distinct focal points.
Maternity Insurance Major Demand
Meanwhile, there has been a remarkable surge in the demand for maternity insurance plans as couples brace themselves for the escalating costs associated with childbirth.
A report by PolicyBazaar shows this trend, indicating that couples in India are increasingly recognizing the financial implications of childbirth and are hence seeking health insurance plans that offer comprehensive maternity benefits.
These maternity insurance policies, which can be purchased up to nine months before childbirth, are experiencing an impressive annual growth rate of 80%, as per available data.
Interestingly, PolicyBazaar notes that a significant proportion—78%—of these policies are purchased by men for their spouses, indicating the shared responsibility in managing healthcare expenses within families.
While these policies are prone to claims due to planned pregnancies, insurers view them as an avenue to attract new clientele, often offsetting expenses through extended premium payment options.
According to Amit Chhabra, PolicyBazaar’s chief business officer (health), corporate policies typically cap maternity coverage at Rs 50,000 per policy.
However, expenses can vary significantly, ranging from Rs 50,000 to Rs 3 lakh, depending on factors like the city of residence and whether the delivery is via C-section. This variability is driving many young individuals to invest in maternity cover, even in the absence of corporate benefits.
Currently, only about 12% of health insurance policies sold in India include maternity benefits, primarily purchased by individuals aged 25 to 35.
Priya Deshmukh, head of health products, operations, and services at ICICI Lombard General Insurance, notes that maternity coverage is commonly offered as an add-on to standard family health insurance plans, typically with waiting periods ranging from 9 months to 3 years.
Notably, a significant portion of maternity claims processed by insurers involves C-section deliveries, particularly prevalent in tier-1 cities.
Deshmukh observes a trend where women are increasingly opting for motherhood at later ages, with the average maternity age rising from 26-27 years to 32-33 years in recent years, leading to heightened pregnancy complications.
Various factors contribute to the escalating rates of C-sections, including the presence of educated women in urban areas, reduced pain tolerance, financial incentives perceived by patients, and the convenience factor favored by doctors.
Reliance General Insurance’s research highlights a steady increase in C-section deliveries in India, climbing from 17.2% in 2016 to 21.5% in 2021.
Therefore, to cater to this growing demand, the company offers the ‘Infinity + Mother & Child Care’ rider, featuring maternity coverage with a standard waiting period of 2 years, extendable to one year upon request.
Additionally, the rider covers vaccination expenses up to Rs 1 lakh, supplementing the sum insured. Rakesh Jain, CEO of Reliance General Insurance, emphasizes the popularity and comprehensive coverage offered by this rider.
Irdai Comes Into Action
Irdai has recently issued a master circular aimed at ensuring compliance with social sector obligations by insurance companies, in line with the goal of achieving universal insurance coverage by 2047.
Under this directive, both life and non-life insurers are required to allocate a certain percentage of their business towards fulfilling obligations in rural areas, the social sector, and motor third-party insurance.
For life insurers, the circular specifies the need to ensure a minimum percentage of policyholders residing in identified and allocated gram panchayats. These allocations will be made in consultation with the Life Insurance Council and the Ministry of Panchayati Raj.
Once gram panchayats are identified, the Life Insurance Council, in collaboration with the Ministry of Panchayati Raj, will allocate specific gram panchayats to insurers, considering factors such as market share. Upon finalizing the allocation for each insurer, the council will share the details with Irdai for review and approval.
Similarly, general insurers and health insurance providers will also be assigned gram panchayats in consultation with the General Insurance Council.
Presently, there are 40 general insurance companies operating in India, including five standalone health insurance companies.
The Need For Expanding Insurance Reach
A recent report by the Asian Development Bank (ADB) emphasises the urgent need for India to expand its universal health coverage, especially for its rapidly ageing population, in order to sustain economic growth.
While countries like South Korea and Thailand have achieved universal health coverage, India lags behind, with only 21% of older individuals having health insurance coverage.
The report emphasizes the need for India to enhance its healthcare infrastructure and coverage to meet the evolving needs of its ageing population and to maintain its growth trajectory.
Aiko Kikkawa, a senior economist at the Asian Development Bank (ADB), noted that initiatives such as Ayushman Bharat, which provides cashless healthcare to the bottom quartile of the population, have significantly enhanced health coverage since their inception.
She emphasized that further expansion of such schemes could not only improve overall health conditions but also enhance the productivity of individuals aged over 60, thereby contributing to the economy. Kikkawa stressed the potential for countries to benefit from a “silver dividend” by effectively engaging and employing older individuals.
In addition to achieving universal health coverage, Kikkawa stressed the importance of extending essential services and interventions that optimize the physical and functional capabilities of older people.
The report revealed that in countries like Bangladesh, Indonesia, and India, more than half of those lacking access to healthcare belong to the bottom two wealth quintiles.
Furthermore, it projected that the economic impact of an ageing population in India during 2031-2040 would be mitigated by its high young population.
According to the report, the number of individuals aged 60 and above in developing Asia and the Pacific is expected to nearly double by 2050, reaching 1.2 billion, which accounts for about a quarter of the total population. This demographic shift underscores the urgent need for robust pension and welfare programs, as well as healthcare services.
ADB’s chief economist, Albert Park, highlighted the potential for economies to benefit from a “silver dividend” through increased productivity among older individuals, which could boost the region’s gross domestic product by an average of 0.9%.
Recognizing the importance of widening the healthcare market and ensuring adequate protection against healthcare expenses, the IRDAI recently eliminated the age limit of 65 years for purchasing health insurance policies.
This move aims to create a more inclusive and accessible healthcare ecosystem, providing comprehensive coverage against unforeseen medical costs.
Regarding financial readiness for retirement, the report highlights regional variations.
It defines an individual as financially prepared for old age if their income, including assets available for liquidation, suffices to meet consumption needs throughout retirement.
A newly devised financial preparedness index indicates that the proportion of financially prepared individuals nearing retirement—within approximately 5 years—is notably high, standing at 86% in Japan and 73% in India.
However, the figures are somewhat lower in China at 64% and in the Republic of Korea at 58%.
The report predicts a significant increase in life expectancy at age 60 in the region, projecting an additional 3.7 years for women and 4.1 years for men from 2022 to 2050.
Consequently, the average regional life expectancy at age 60 is anticipated to rise from 21.6 to 25.3 years for women and from 18.2 to 22.3 years for men.
Albert Park, commenting on Asia and the Pacific’s rapid development, emphasizes the need for proactive government measures to address the mounting demographic challenges.
He stresses the importance of policies supporting lifelong investments in health, education, skills, and retirement financial preparedness. Additionally, fostering strong family and social bonds is crucial for nurturing healthy and productive older populations, maximizing their societal contributions.
The report reveals that 40% of individuals aged 60 and above in Asia and the Pacific lack access to any form of pension, with women disproportionately affected due to their higher likelihood of engaging in unpaid domestic work.
Thus, many older individuals in the region are compelled to continue working well beyond retirement age for survival. Alarmingly, 94% of those still working at age 65 or older are employed in the informal sector, which typically lacks basic labor protections and pension benefits.
While India’s insurance sector has made significant strides in recent years, there remain notable disparities compared to developed nations’ insurance sector.
Developed economies boast mature and sophisticated insurance markets characterized by extensive product offerings, high market penetration, and robust regulatory frameworks.
In contrast, India’s insurance sector is still evolving, struggling with challenges such as expanding financial inclusion, enhancing consumer awareness, and regulatory complexities.
Despite these challenges, India has witnessed notable advancements, particularly with initiatives like Ayushman Bharat, aimed at extending healthcare coverage to the underserved population segments.
However, there are areas where India’s insurance sector can further improve.
One critical aspect is the need to enhance universal health coverage, especially for vulnerable groups and the rapidly ageing population.
Hence, initiatives to expand health insurance coverage and improve access to quality healthcare services are imperative.
Additionally, as highlighted by the ADB report, there is a need to bolster financial preparedness for retirement by encouraging lifelong investments and ensuring adequate pension and welfare programs.
Likewise, regulatory reforms and policy interventions are essential to promote innovation, competition, and consumer protection within the insurance sector.
The Last Bit, while India’s insurance sector has made commendable progress, there is still work to be done to align it with the standards observed in developed nations.
Therefore, by addressing key challenges and implementing strategic reforms, India can strengthen its insurance ecosystem, improve financial resilience among its population, and contribute to sustainable economic growth and social welfare.
