India’s push for digitizing its financial services led by the ruling federal government’s Digital India initiative and its bold steps towards commitment to financial inclusion is getting many global players interested.
A growing population of 1.38 billion and the soaring aspirations of India’s populace are presenting the opportunity for motor insurance companies to tap large volumes of prospective consumers.
According to the Indian insurance regulator, the motor insurance business reported a growth rate of 8.91% to take a share of 38.08% of the total general insurance business in India in 2018-19. Just the previous year to 2018, latest motor insurance premium figures revealed it was the best performing non-life insurance segment in India with gross direct premiums of INR 59,246.11 crore.
We spoke to top digital insurance players in India to understand changing trends in the way Indians buy motor insurance and how the focus on digital offerings is disrupting a fragmented insurance market in the country.
Challenges Facing Motor Insurance In India
Driving a motor vehicle without insurance in a public place is a punishable offence states the Motor Vehicles Act, 1988. Under this Act, the Indian government made third-party motor insurance statutory, which means the owner of the vehicle is legally liable for any injury or damage to third-party life or property caused by the use of their vehicle in a public place. This has forced consumers to mandatorily purchase motor insurance, but there are many slip ups in the process say insurers.
Sanjay Datta, the chief of underwriting, claims & reinsurance at ICICI Lombard, which has the highest market share in motor insurance among private players, finds negligence among the top reasons for consumers faulting on motor insurance covers.
Customers tend to buy insurance while buying a new vehicle as a compliance measure and some of them even continue to renew their insurance policies for a couple of years later. However, beyond 3-4 years, they feel insurance is no longer required. This behavior is more prevalent outside metro cities where compliance pressure isn’t as much.
A metro city India in is a city with a population of at least 2 million. New Delhi, Mumbai, Chennai, and Kolkata are all counted as India’s metros.
Second, the fierce competition has turned the category into discount wars. Most customers focus primarily on prices and at times are unaware of the various features and service quality aspects of their policies such as the claim settlement ratios, among others.
Lack of Discipline
Bisheshwari Singh, the chief marketing officer of Universal Sompo General Insurance, thinks the Indian auto insurance consumer is not really risk-averse but risk-loving, considering at least 58% vehicles registered in India are still uninsured despite third-party insurance being mandatory.
Singh says consumers must understand the cost of repairs become soaring high in cases of accidents and that there is a reason behind third-party insurance covers being mandatory.
The majority of Indian consumers without an insurance cover are commercial vehicles & bike owners, with a heavy skew in semi-urban & rural geography as compared to metro and urban customers, explains Abhishek Tiwari, the CEO of iAssure.
Tiwari finds private car owners in metro and urban locations are relatively more disciplined but cautions both bike and commercial vehicle customers in the same geographies need better vigilance and monitoring.
Low Level of Awareness
Adarsh Agarwal, the appointed actuary at Digit Insurance, explains a lot of the vehicles in India are uncovered or under-covered because third-party liability cover, which is mandatory, does not offer coverage for any damage to the vehicle itself. He sees a huge opportunity for insurers to raise more awareness on why auto insurance is useful, and to offer relevant products and covers and build simple and hassles-free claims processes.
iAssure’s Tiwari too thinks lack of awareness is among the prime reasons for the current state of motor insurance adoption by Indians.
Complex Financial Jargon
Universal Sompo’s Singh believes insurance is considered as a technical product in India and probably that is the reason for its lower penetration.
“The industry should opt for designing the products with very simple wordings so that there shall be real consensus in them. Transparency at the time of claim is another very important aspect and there should be customer delight at the time of claim settlement,” Singh says.
Ways to Buy Motor Insurance in India
Motor insurance is a way to avoid financial strain in the face of an accident, natural disaster or any other unforeseen incident. And it is a must-have in a heavily populated country such as India where 4.67 lakh road accidents happened in 2018 alone.
Buy Your Insurance Cover via an Intermediary
To buy a motor insurance cover, the Insurance Regulatory and Development Authority of India (IRDAI) suggests consumers only go through the insurance product life cycle via a regulator-approved intermediary such as a corporate insurance broker or an individual insurance agent.
This intermediary assists consumers from the point of sale through policy servicing, up to claim servicing. He or she is responsible for providing all material information with respect to a proposed cover with complete disclosures and transparency. When choosing your insurance broker, there are nine top points to keep in mind, according to the IRDAI.
- Ask for and check whether the person holds a valid license and is authorized for the particular business. The intermediary should be licensed to sell life insurance or general insurance or both.
- Check whether he or she has a good knowledge of various insurance products or policies.
- Ask questions and understand the policy terms and conditions of the policy the intermediary is trying to explain to you.
- Ask for brochures and sales literature pertaining to the product you are considering. Get the intermediary to explain the full facts of the products, scope of cover and exclusions.
- Insist on quality delivery and timely service. You can judge this by the turnaround time of the intermediary during the period of pre-sale when he or she is dealing with you.
- Fill up the proposal form yourself. Never sign a blank proposal form. If you find terms in the proposal form that you do not understand, ask the intermediary to explain it to you.
- When you make premium payments through an intermediary, check whether he or she is authorized to do so by the insurance company and insist on a duly-signed receipt.
- After the receipt of your policy, go through it thoroughly and if you do not understand certain terms contact your intermediary and get them explained.
- Ask the intermediary questions about documents and procedures involved in making a claim and understand them completely. In the event of a claim, there may be other agencies you have to deal with apart from the insurance company.
Buy Your Insurance Cover Online
The “DIY” approach is disrupting the way insurance is consumed in India. Consumers are now exploring three main avenues for their motor insurance covers and insurance companies are putting their best foot forward in expanding their presence in all the three spaces.
Direct Purchase Via Insurance Companies’ Websites
For consumers who are loyal and satisfied with their previous insurance covers and would like to continue their policies with the same insurance companies, the easiest way available digitally is for them to visit their preferred company’s website.
The online purchase and claims settlement process is very simple if the consumer has the Indian government-mandated Aadhaar Card, which is considered a valid proof of a person’s identity, place of residence, mobile number and linked bank accounts.
The biggest advantage of an online process is that it encourages a consumer to take extra effort to clearly understand all aspects of the insurance policy they are opting for. It also puts an onus on the consumer for the decisions they make with respect to their choice of the policy cover.
More ownership means more vigil, which may be a welcome change for an industry that often experiences negligence by consumers in India.
Consumers interested in experimenting with a new insurance policy cover too can explore directly on various insurance company websites and get specific responses to their queries from help and support teams on each of the websites.
All insurance companies registered with the IRDAI offer purchase of insurance covers on their websites. The list is readily available on the IRDAI website.
Purchase Via Online Marketplaces
Financial products and services are being tailored to meet specific user needs and are being delivered on demand through apps or marketplaces.
India has seen a spurt of online marketplaces that enable consumers to study numerous policies and make informed decisions based on in-depth analysis.
Online marketplaces offer two advantages:
Wide Range of Options
Consumers in India are excited about the wide range of options that online marketplaces offer, whether it is for a financial product or a service. With respect to motor insurance, crucial details such as compulsory deductibles, no claims bonus and the claims settlement ratio can be compared with the click of a button on online marketplaces. This helps consumers make quick decisions without the threat of being cheated or misled.
Ease of Payment Processes
Most online marketplaces in India assist consumers in making advanced digital payments and offer various options to pay for their policies. For example, users can pay via any means of digital payments—debit cards, credit cards, digital wallets or direct bank transfers—bringing transparency in the payments process. Emerging trends such as cashbacks and systematic monthly payment plans make buying an insurance policy on online marketplaces interesting.
Among some of the popular online marketplaces for the sale and purchase of motor insurance policies in India are BankBazaar, Coverfox, InsuranceDekho, PolicyBazaar and PolicyX.
Purchase Via Global Technology Companies Offering Insurance
Global technology companies have identified financial services, such as the payment space, and specifically digital wallets and insurance, as a way to convert their large databases of consumers into diverse business opportunities.
2020 marked the entry of three robust global technology companies selling motor insurance in India.
Flipkart is India’s most successful startup. Paytm started as a digital wallet and has now expanded its scope to a full-fledged bank, asset management company and insurance seller. Amazon is the new entrant in India.
Traditional insurance companies understand the reach global tech giants provide and are racing for collaborations with the India-specific operations of these firms. Amazon, in its collaboration with Acko General Insurance, announced its plans to sell motor insurance policies via its Amazon Pay platform. Subscribers of the Amazon Prime services would get an extra discount of up to INR 999 on their policy cover and additional benefits such as outstation assistance and consumables for INR 40, among others.
These technology companies eyeing a pie of the large insurance market in India indicates how rapidly the market is evolving to suit consumers’ changing preferences and provide them the ease of access and processes.
Future is in Going Beyond the Conventional
Irrespective of the distribution channels deployed to sell an insurance cover, the onus to create consumer-friendly motor insurance policies and offer them to consumers in the easiest possible way still lies on India’s motor insurance companies.
Companies are going beyond their conventional approach to reach out to consumers in a way never experimented before. Five such examples include:
Technology Adoption Beyond the Basics
The insurance companies need to go beyond telesales, virtual sales assistants, chatbots and voice bots and development of artificial intelligence to embrace blockchain technology for sales and after sales, says Universal Sompo General Insurance’s Bisheshwari Singh.
He bats for fully-equipped and upgraded online portals for customers and channel partners for issuing quotations, capturing and authenticating material information, collecting premium, issuing policies, claims intimation, submission of claim documents and tracking of claims.
Realizing the latent consumer need and potential of technology, companies are designing risk based solutions for motor insurance different from the conventional motor insurance so far.
Sanjay Datta of ICICI Lombard explains three ways in which risk-based solutions are being offered to enhance the consumer experience of buying motor insurance.
- Based on telematics behavior, a customer can now enjoy better premiums.
- A customer with relatively low vehicle usage can buy a limited kilometer plan and choose to pay considerably less than a conventional plan.
- A customer can buy a single policy for all vehicles registered under their name, leading to ease of keeping the insurance policy and hassle-free renewals for all vehicles simultaneously.
Usage-based Policy Models
Shanai Ghosh, the Executive Director and CEO of Edelweiss General Insurance, believes usage-based policy models are really the way ahead to give value to the consumers without compromising on profitability.
Edelweiss General Insurance started operations two years ago, with auto insurance being a key segment and has since then introduced new age offerings for its customers.
The company’s recently launched driver-based insurance model called SWITCH, in which the insurance is calculated on the age and experience of the driver, uses a pay-as-you-use model that allows the customer to pay the premium only on the days they use the vehicle. This offers significant cost savings and convenience.
Customers can use the insurance company’s app to switch their policy cover on and off depending on whether they are driving that day. Also, while the policy covers accidental damage when it is switched on, vehicles are covered through the year against fire and theft, even if the policy is switched off at that time.
Zero Touch Services
People have gradually started looking at contactless or zero touch services where they do not have to come in physical contact with a third party. Insurance companies such as Digit, which has a 2.6% overall market share for motor insurance in India as of June 2020, offers a zero touch experience with its pre-inspection benefit, paperless insurance and cloud-based service.
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Digit’s Adarsh Agarwal says this approach helped the company settle claims and issue policies even during the lockdown months due to the coronavirus pandemic.
An increasing number of commercial vehicles are opting for telematics solutions owing to inefficiencies and challenges in the existing transporting ecosystem.
iAssure’s Abhishek Tiwari thinks with increased adoption of FASTag and digitisation of process at Regional Transport Offices, there might be huge data insight that can be made available towards making consumer-friendly products.
FASTag is a simple, reloadable tag to collect electronic toll via automatic deduction of toll charges on National Highways of India.
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