November 22, 2017
Evolution of Indian Motor Insurance
by Varun Dua
From buying vegetables to searching for prospective life partners, Indians have found a convenient alternate in the form of websites and apps.
The Indian general insurance sector is growing at a healthy 17% a year. Motor insurance is the biggest chunk, accounting for 49% of the gross direct premiums earned (FY16), at $6.5 billion. The Motor Vehicles Act, from 1988, mandates that every vehicle should be compulsorily insured for third-party risks. With the expected growth in automobile sales (6% CAGR in the past 5 years), motor insurance sales are also expected to grow. These numbers are set to rise owing to the changing consumer profile, as well.
The legal mandate demanding the purchase of a third-party liability insurance policy compelled Indians to opt for motor insurance. It was a box that was needed to be ticked off, nothing more. However, the mandate did acquaint people with the philosophy of motor insurance. They started looking at the financial benefits associated with the policy, and the insurers capitalized on this window. Innovative offers and alluring discounts encouraged vehicle owners to look at motor insurance in a holistic manner.
Recent developments opened the gates wide, by allowing 49% foreign direct investment (FDI). The investment increased capital inflow, leveled the playing field and fostered better market penetration. Insurers now concentrate on offering innovative products, providing better administrative services and ensuring hassle-free claims.
The Indian general insurance market grew from $2.6 billion to $13.4 billion in a span of 14 years, from 2002 to 2016, according to several reports by IBEF, and is poised to keep expanding.
See also: Motor Insurance: Get Back to Value!
Warming Up to Digital Platforms
Traditional as well as up-and-coming insurance providers warmed up to going digital and created websites. Their offline activities also continued, but their online activities were future-oriented. Even though the insurers did not go all out with their digital activities, they certainly created an online presence, as it gave the following advantages to insurers as well as the insured:
- Cost Factor
Operational costs reduced with the digital move. Customers benefitted from it in the form of pocket-friendly policies. Standardization helped insurers to service the customers efficiently and effectively.
- Ditching the Agent
As motor insurance could be purchased online with a few clicks, the role of the traditional agent was curtailed. Simple forms demanded to-the-point information, and prospective customers filled the forms themselves, thus reducing the chances of wrong information and mitigating fraudulent activities. The service seeker and service provider spoke with each other directly, without any middleman.
India was getting used to purchasing things online. From buying vegetables to searching for prospective life partners, people found a convenient alternate in the form of websites and apps. People researched about the features, fortified their motor insurance policy with add-ons and purchased or renewed their policies online, at their convenience. Features like cashless garage services made it easy for the insured to get a vehicle repaired conveniently.
- Smooth After-Sales Service
New touchpoints enabled customers to address their grievances through social media. Insurers also considered it as a priority and started engaging with customers through platforms like Facebook and Twitter. Claim-related queries were addressed through social media platforms; everyone could see if a query was pending or was resolved.
Riding the Technology Wave
Over the years, technology has played a crucial role in making the Indian motor insurance sector efficient. Insurers offered several add-ons to the comprehensive motor insurance policy along with the basic third-party liability policy. Strong comprehensive policies came into the picture, and the insurer as well as the insured benefitted. There was a reduction in administrative costs without compromising the cost-efficiency. It became easier for the insurer to ask for necessary details and for the insured to provide them with Know Your Customer (KYC) norms. Customer acquisition as well as customer servicing costs went down, and the insurance sector’s reach widened.
The insurers were able to offer policies online, and customers could make an informed decision by researching and getting in touch with the 24/7-available customer service executive. Web aggregators made it easier for customers to compare policies online and then go for their preferred option. Mobile apps emerged and allowed the customer to contact the company instantaneously, and vice versa. Technological advancements made the industry transparent and accessible, and, soon, they will make insurance desirable.
Road Ahead for Indian Motor Insurance
It is high time that motor insurance premiums are not solely based on the vehicle’s model and its basic locking system. Data will make it possible to determine premiums based on the driver’s age, gender, driving record, location and several such factors. Technology will provide data related to average car speed and the manner of driving. All this will determine the premium, almost in a customized manner.
See also: The Sharing Economy and Auto Insurance
Product, service, distribution, underwriting, costing, strategic partnerships and other aspects of the business will be determined keeping technology and data at the core; that is what we believe in at Acko. These new approaches will be used to engage with the customers, reduce risk and achieve cost efficiency. India is welcoming a Digital Life, and motor insurance providers are leveraging technology to cater to the requirements of the digital-first generation.