Low insurance penetration, expanding markets and emerging risks offer more opportunities but digitalisation, web aggregators and changing customer preferences pose stiff competition to brick and mortar brokers. Asia Insurance Review spoke with Tata Motors Insurance Broking and Advisory Services managing director and CEO M Ravichandran about Indian brokers’ plans to face the competition.
Indian insurance brokers have been the largest contributor to the growth of the country’s non-life insurance premium since the process of insurance industry liberalisation began.
During 2018-19, the non-life insurance industry wrote a gross premium of $23.88bn and brokers contributed around 22% of it at $5.25bn.
Mr Ravichandran said, “The first broking licence in the liberalised era was issued in 2003. Today there are 460 valid brokers registered with the Insurance Regulatory and Development Authority of India (IRDAI).”
According to a 2016 EY report ‘Vision 2025: brokers driving customer-centric growth’, the Indian non-life insurance market is expected to touch INR4tn ($55.8bn) by 2025 and insurance brokers are expected to handle around 40% of this.
An important role in the insurance value chain
Mr Ravichandran said, “Brokers play a major role in assisting corporates with the commercial lines of business insurance which are complex in nature. As risks grow more complex and become larger, more risk managers find value in engaging with brokers.
“Intermediaries analyse information about risk scenarios and organisational requirements, which help insurers develop new and innovative products and create a market where it did not exist. We also introduce consumers to the innovative add-on covers to suit their requirement. There are a few insurance brokers like us who are also active in the retail insurance segment,” said Mr Ravichandran.
Outlook for 2020-2030
Speaking about his outlook for the next decade Mr Ravichandran said, “This is an age of the survival of the fittest. We have competition from various channels of intermediaries and also direct sales channels of the insurers. The next 10 years will be as challenging as the previous decade in terms of changing business environment and changing socio-economic situation not only in India but globally.”
He said, “Growing internet and smartphone penetration has certainly created a wider reach resulting in varied price points and product offerings. Insurers are also deploying technology to further drive the growth of direct sales in India.
“The insurers are also using AI-based customer interface solutions such as chatbots for product queries, sales, as well as payment reminders. This has contributed to improved customer relationship management, thereby supporting growth of the sector.
Digitalisation brings new challenges
“The businesses are becoming more complex and this brings in new demands from customers to provide better risk solutions, which are unique and customised for the new challenges. This is where our role begins to bring in expertise to manage these complexities,” he said.
Mr Ravichandran said, “I am very hopeful that the third decade of the millennium will see insurance intermediaries increasing their penetration in various segments and partnering with insurers to bring in innovative insurance products and services for the new customers.
100% foreign direct investment in insurance intermediates
Speaking about permitting 100% foreign direct investment (FDI) in the insurance intermediary business, Mr Ravichandran said, “It is perhaps a little too early to comment on this move by the government. We also need to examine how did the 2015 FDI enhancement from 26% to 49% fare?
“With 100% FDI in insurance intermediaries we can look forward to the latest technology, global best practices and better job opportunities to come into the country. We should also ensure that these help in increasing the insurance penetration. The Indian brokers am sure would continue to stay relevant and would upgrade themselves to meet with increased competition. We have an opportunity to upgrade our skills, our offerings to our customers, ensure that our relevancy remains intact and at the same time we also contribute to the growth and development of the industry. We benefit only if the industry grows,” said Mr Ravichandran.
Upgrade and reskill
He said, “This is the time to develop our own in-house capabilities to address the changing needs of the customer as industry digitalisation progresses. With more choices and better aware and enlightened customer we need to be able to offer sound and timely advice.”
“Innovative customer service, particularly in claims, would keep our relevance intact.
Clients would need professional advice and guidance to make sure that they get the best protection available and in case need arises also their rightful claim at the right time,” Mr Ravichandran concluded. A