Written by Jayesh Gadekar, Global Insurance Brokers
To understand the evolution of the insurance industry in India, we need to divide the last couple of decades into “Pre-Tariff” and “Post-Tariff” eras.
The Indian insurance industry has predominantly been regulated by a tariff regime, prescribed under multiple tariffs (Fire, Engineering, Marine, etc.). These tariffs were established in such a way that left room to cross-subsidise other insurance products, namely Health & Accidental.
The Health, Accidental and Term Life revolution - if one may call it so - was initiated around the early 2000s when the Indian insurance industry went through a lot of transformation, for example:
- Private insurance companies were licensed for the first time.
- Insurance brokers were permitted.
- Corporate agencies were introduced.
This was also around the time of the Indian IT industry boom, when India opened its doors for numerous global industries to set up in what is still one of biggest marketplaces in the world.
The boom of the multinationals, IT and ITES industries was a key driver of Health & Accidental insurance in India, in many ways:
- Global benefits culture was introduced.
- Employees became seen as the corporates’ biggest assets, which ensured that they were better taken care of.
- Medical and Accidental insurance products were rather cheap, due to the cross-subsidy offered by the tariff on other products, such as Fire, Marine, Motor, etc.
- Post the tariff regime, however, the cross-subsidy disappeared, as there was no rate tariff anymore. Premiums and benefits have since undergone changes.
- Premiums for Employee Benefits insurance programmes were approximately 0.75% of the total salary. This has since increased to almost 3%.
- Some of the major changes from the last decade relate to parental insurance. The family definition has moved from Employee + Spouse + Children + Parents to Employees + Spouse + Children, with only a voluntary policy offered for parents.
- The sums insured have stayed in the range of INR.200,000 to INR.500,000. However, with medical inflation at 10% there will be requirement to structure benefits in a different way.
- LGBTQ and Mental Health cover is now available.
- Wellness is gaining prominence in the discussion. However, until premiums are linked to the wellbeing of the employees and the overall health score of the corporate, it will remain a buzz word with no actual link to premiums or claims.
- Use of technology and Artificial Intelligence, Machine Learning and Automation will be critical, not only for the employee experience but also for better underwriting of programmes and better predictability. Big Data analytics will tell us a lot about these programs in the future.
- Government is now investing in the overall health infrastructure post-covid, to ensure that healthcare is also available in tier 2 and tier 3 cities. This step is complimented by investment in the infrastructure development of the country e.g., road / highway network, schemes for business development and small and medium scale industries to have a more even spread in the population to Tier 2 and Tier 3 cities.
- The recent launch of the Pradhan Mantri Bima Yojana (PMBY) - where health insurance is offered to people living below the poverty line with sponsorship from the state government and central government – is another step towards health insurance access to all by the government.
- Health and Motor insurance (which is mandatory) contribute roughly 60% to the overall insurance market in India.
- Health insurance penetration remains low in one of the largest populations in the world.
- Newer products for new age workforces – consulting, gig workers, Millennials, Work from Home, etc.
This piece is from The RES Forum’s research paper – India, Regional Research Special. You can download the paper here.
For more information about the RES Forum, follow us on LinkedIn.
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GLOBAL is one of the leading providers of Insurance & Reinsurance broking, Risk Management and Claims Services. GLOBAL was established in 1973. The company takes pride in having more than 45 years of rich legacy in the insurance and reinsurance domain. GLOBAL is a composite broker licensed by the Insurance Regulatory and Development Authority of India (IRDAI). We have 420+ highly skilled and experienced employees with expertise in multiple fields across 15 locations in India, who jointly strive to offer customised solutions to best suit the clients’ needs. We serve clients across India and Srilanka, Nepal, Bangladesh, Bhutan & Maldives.
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