Nine years ago, when I wrote "Riding the Indian Tiger," India was in a dynamic transition. Unbridled by the shackles of a socialist government, the economy was in full swing, with massive foreign direct investment, major infrastructure projects and a booming stock market. When I began researching my book, I had the opportunity to meet with the architects of India’s future, who included the founders of leading companies: Infosys, Jet Airways, Bharti Tele-Ventures, Tata Motors, Wipro and many more. I was impressed by the energy, intelligence and Silicon Valley culture that had been created by these firms.
That optimism was tempered by the abject poverty that abounded, a growing gap between rich and poor, dilapidated infrastructure, contaminated drinking water, poor sanitation and corrupt government ministries. Still, I believed that, with ingrained democratic institutions, India would ultimately out pace China economically.
Then came the global financial crisis, and India fared far worse than China, which had the ability to manipulate markets and weather the storm.
With the overwhelmingly popular election of Narenda Modi in 2014, India once again emerged as an Indian Tiger. With GDP growth of 6.6% for 2016 and an estimated GDP growth of 7.2% for 2017, India is, in fact, surpassing China in economic growth.
What about the insurance market? India, with a population of 1.2 billion, is now the 14th largest insurance market in the world at approximately $60 billion. McKinsey estimates that India will become the 10th largest insurance market in the world by 2025, with a value of more than $250 billion. Now, Brazil with a population of 200 million, is the 15th largest insurance market in the world today. Still, change is in the wind in India.
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It began with the liberalization of the domestic insurance market, which allows foreign companies to own as much as 49% of an Indian subsidiary. Foreign insurance companies are racing into the market, with an estimated $3 billion in direct investment coming into the Indian insurance industry in the next few years.
But is the market ready for disruption?
It depends on how you look at it. With a rapidly growing middle class, tech-savvy millennials and a life insurance market that has had an average CAGR of 22% over the past several years, the answer is yes.
Yes, Brazil and India both have about 300 million smart phone users, even though India has six times the population, but the Indian insurance market is rapidly changing as old brokers and processes are forced to give way to a much more dynamic market.
The clear and present opportunity for disruption in India will be a combination of transformational insurance products that create optimal flexibility for a rapidly growing middle class and the use of digital marketing channels that allow insurance companies to develop a virtual personal relationship with the new consumer.
Digital marketing is still in its early stages in India, with total spending of $6.8 billion in 2016. However, with the average Indian internet user spending 40 to 45 hours a month online, the opportunity is clear. The purchase of goods and services online is still in its infancy, with the majority of purchases being related to music. Most telling might be the fact that online retail brokerage is booming in India, dominated by middle-class Indian housewives who are running their own stock portfolios.
My recommendation for any savvy insurtech: Begin your reconnaissance now. Keep your powder dry until the time is right, but that might be sooner than you expect!