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Nurturing Tomorrow’s Insurance Ecosystem: Role of Government and Regulators
Nurturing Tomorrow’s Insurance Ecosystem: Role of Government and Regulators

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As India embraces the digital age, Insurtech is emerging as the catalyst that transforms the insurance landscape. The government's strategic initiatives, coupled with regulatory foresight, are not just clearing the path for insurtech innovators but are also shaping an ecosystem where insurance becomes more affordable, competitive, and adaptive to the diverse needs of the population.

Government Initiatives for Insurtech Growth in India

Objective

Initiative

Affordability of Insurance

- Ayushman Bharat Yojana: PM Jan Aarogya Yojana (PM-JAY) offers free-of-cost basic family health insurance coverage of up to INR 5 lakh

Competitiveness of the Indian Insurance Market

- Divestment of government share in public insurance firms: Divestment of government share in public insurance firms – by open market operations and through institutional participation, along with consolidation for higher competitiveness

Insurance Product Innovation

- Health Claims Exchange and Bima Sugam: Deepen insurance penetration and simplify the claim procedures

Use of Data Generated Across Digital Insurance Value Chain

- Data Value: IRDAI's CS Guidelines 2023 include the value of an asset excluding the value of the data it contains

Investments in the Indian Insurance Market

- SPV for PE Investments: Private equity (PE) funds can invest in insurance companies through special purpose vehicles (SPVs) with a five-year lock-in period

(For more information, refer to the ICICI Lombard - nasscom Digitalizing Insurance: Indian End-Consumer Perspective report)

Despite the proactive measures, challenges persist. Legacy technology investments are proving to be roadblocks on the path to digitalization. Following are some key challenges providers face:

 

Challenge

Description

Poor End-to-End Customer Experience

InsurTech companies are focused on solving purchase issues for B2C and B2B customers. However, end-to-end experience remains largely unchanged. Poor claims experience, complex product descriptions, and jargons adversely affect the customers’ post-purchase experience.

Inefficiencies in Insurer Business Model

Legacy technology stack and analog process design hamper the agility of traditional insurers. More focus on short-term customer acquisition than that on leveraging technology to build sustainable customer lifetime value, is concerning.

Limited Product Innovation

Despite advancements in new-age tech, its use by companies in designing better products, that which can enhance insurance customers’ journey while delivering better business outcomes for companies, is inadequate. Providers continue to rely on largely unchanged and commoditized insurance products. Traditional insurers have been pushed to change post COVID-19 pandemic.

Tough to Model Newer Risks

Legacy products with fixed, inflexible risk covers, prove completely unfit for changing lifestyles, demographic mix, rising climatic disasters, and highly volatile geopolitical and macroeconomic scenarios.

Broken Distribution Channels

Traditional branch-based insurance buying approach needs a revamp as the digital-first generation shows preference towards multi-touchpoint channelling. For example, offline experience centres of digital-first direct-to-consumer InsurTech providers or aggregators, such as PolicyBazaar.

Source: ICICI Lombard - nasscom Digitalizing Insurance: Indian End-Consumer Perspective report

In navigating these challenges, the insurance industry in India has an opportunity to not just innovate but to redefine the entire landscape of insurance. As the industry addresses these complexities, and the government and regulators focus on affordability, competitiveness, innovation, data-driven strategies, and strategic investments, the path to a more resilient and customer-centric Insurance ecosystem will get paved.


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Dhiraj Sharma
Principal Analyst

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