Indian InsurTech sector to bolster digital adoption and grow tangentially

By Puja Sharma

The India InsurTech Landscape and Trends Report (Report) was launched at the India InsurTech Association (IIA)’s Annual Event 2022. IIA and BCG collaborated to identify dominating trends and key players’ views in the Indian InsurTech sector.” This annual InsurTech report is a first in the Indian industry covering various aspects of the InsurTech landscape. The report covers key trends and stakeholders’ views that would shape up/ or are shaping up/with the InsurTech industry.

According to the Report, rapid funding in InsurTech has continued across the globe and has also seen strong momentum in India. Global Funding in InsurTechs has grown 7 X in the last 5 years from $2.5b in 2017 to $14b in 2021 with growth continuing even during the pandemic period. The funding in the sector in India has also doubled in the last 2 years, from $290m in 2020 to $800m in 2021. There has been a steady rise in no of insurtech unicorns with over 20 Unicorns in 2021, 14 in the United States, 4 in the UK, and 2 each in India (Acko & Digit Insurance ) & France, 1 each in Austria, Israel & Mexico.

The Report succinctly draws out the key challenges as seen through the lens of industry stakeholders and highlights the key imperatives for creating a robust and deep InsurTech ecosystem in India. InsurTechs in India is well-positioned to cater to the nuanced needs of customers and are at the cusp of exponential growth.

Commenting on the report, Subhajit Mandal, Co-Founder of IIA (India InsurTech Association), said: “We are highly optimistic about the Indian InsurTech landscape in the next few years. The sustained funding levels over the last couple of years have helped launch multiple InsurTech startups, which is key for innovation. Enablers such as India Stack, Insurance Information bureau, and the regulatory sandbox have provided a strong platform for innovation in the insurance value chain”.

Regulators and Government Bodies have also been supporting Innovation and Transformation in the Indian Insurance Industry. IRDAI has played an active role in supporting innovation in the industry. The recent regulatory sandbox is a crucial milestone in this regard and saw participation by more than 22 insurers who submitted more than 170 proposals. Further impetus has been provided by the launch of the National Health Stack. Insurers and Insurtechs can work with regulatory bodies and government agencies to continue to strengthen some of these platforms for further experiments.

 Jitesh Shah, MD & Partner BCG Asia Pacific Lead, Operations in Financial Institutions at BCG added: “As the sector experiences unprecedented growth, it is critical to continue the collaboration between insurers and insurtechs. It is also important for the industry to keep innovating to address important issues such as deeper insurance penetration, customer health, wellness, etc. To ensure that the sector experiences continued growth, there is a need for key enablers such as the National Health Stack, regulatory sandbox, and Insurance Information Bureau.”

SMEs in emerging as a key customer segment

• Affordable healthcare for employees of small and medium enterprises remains an unaddressed segment. There is an opportunity to provide holistic health and wellness and enable SMEs to improve employee retention.
• Thrust for employer /Group insurance for large no of emerging SMEs by customizing offerings focused on providing affordable solutions
• Data and analytics as core capabilities: Leveraging data & analytics to drive operational efficiencies, Enhance pricing proposition
• Digital data and analytics can no longer be viewed as a capability of the future, are becoming table stakes. There are multiple use cases across the value chain to help drive innovation and personalisation

Importance of higher distribution penetration and reach

• Insurance penetration for health and life products continues to remain low in India vs global distributors. To increase penetration it is crucial to reimagine distribution through traditional and newer channels and approaches
• Increasing importance of enhanced customer experience
• Customers are expecting a seamless experience as offered by tech disruptors for other key offerings. Insurers focussing on customer experience are seeing lasting results
• Emphasis on Health insurance through the National Health Stack which has the opportunity to become a global standard, similar to UPI.

Key highlights

• India Funding in InsurTechs has doubled in the last 2 years; Global funding has grown 7x in the last 5 years.
• 2021 has witnessed 22 InsurTech unicorns globally.
• MSME to be key growth engines.
• Tier II and III cities in India to contribute 70% of the consumption by 2030.
• National Health Stack to transform Health Insurance.
• Emergence of new customer segments (Tier 2+, women, SMEs, etc.)