Study urges India to align with insurance in leading markets
A joint study conducted by risk management group RIMS and the National Insurance Academy (NIA) of India said that the Indian insurance market must align with leading global markets in freedom of pricing, coverage, limits, and deductibles in insurance.
Overall, these reforms are expected to enhance the financial soundness of insurance firms, incentivize risk mitigation and product diversification, improve insurance coverage, and bridge the insurance protection gap. The results would be a win for both insurers and policyholders, the study said.
Indian insurance vs. the global insurance market
The study, called “International Best Practices to Increase Insurance Penetration and Risk Management Study,” specified that its findings are to generate recommendations to fuel the growth of the Indian insurance market.
The study found that most countries are allowed to exercise freedom in pricing; comparatively, some lines of business in India, like fire, remain fixed due to conditions imposed in reinsurance treaties
Nine out of 10 countries believe that they have freedom in policy wordings; comparatively, Indian insurers do not have freedom in issuing customized policy wordings. The study goes on to suggest that enabling insurers to customize the policy wordings in accordance with the risk profile would encourage product innovation and will meet customer needs
Nine out of 10 countries have freedom in deductibles and loss limits as the sum insured is higher. Conversely, a majority of commercial policyholders in India cannot have loss-limit based policies or increase their deductibles where the sum insured is lower than $350 million at a single location
Eight out of 10 countries globally allow flexibility in policy tenure. India, on the other hand, only has access to short-term insurance in non-life insurance policies for a minimum of one year. Motor insurance coverages offer longer term policies, with terms available for up to three or five years.
Seven out of 10 countries believe that they can provide seamless claims experiences to their customers. India, however, has a strong need for simplification and standardization of its claims process, with the study foreseeing an improvement in claims settlement time and transparency as a result. Delays in complex and/or large claims also need to be addressed
Forty percent of the countries surveyed said that they have the availability of end-to-end insurance solutions, whereas in India, insurance brokers are only allowed to sell insurance products while other financial intermediaries are allowed a wider range of products that include insurance. The study calls for a need for relaxation in norms by authorities with regards to insurance brokers
Eight out of 10 countries’ officials state that risk-based solvency exists for their insurers. Insurance companies in India, on the other hand, need to maintain a solvency ratio of 1.5 times
The study was conducted with senior industry experts in 10 markets, including Australia, the UK, France, Singapore, the US, China, Hong Kong, UAE, Spain, Germany, and India.
“The insurance industry, as a facilitator and key contributor to economic growth, can play a crucial role in achieving the goal of ‘Insurance for all’ by 2047,” RIMS India Chapter NKV chairman Roop Kumar said. “The report provides global benchmarks on proven insurance practices, and discusses critical aspects like customer experiences, seamless claim settlements, and adoption of new technologies. The time is ripe for introducing changes in the insurance industry that will provide choice and option to the policyholder and lead to growth in the industry.”
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