A joint study conducted by risk management group RIMS and India’s National Insurance Academy (NIA) said the Indian insurance market should be on par with leading global markets in pricing freedom, coverage, limits and deductibles in insurance.
Overall, these reforms are expected to improve the financial health of insurers, provide risk mitigation incentives and product diversification, increase insurance coverage, and bridge the insurance coverage gap. The result will be a win for insurers and policyholders alike, the study says.
Insurance India vs. global insurance market
The study, called “International Best Practices for Increasing Insurance Penetration and Risk Management Studies,” determined that its findings lead to recommendations for driving the growth of India’s insurance market.
- The study found that most countries are allowed to exercise some freedom in pricing; comparatively, some lines of business in India, such as fires, remain fixed due to conditions imposed in reinsurance agreements
- Nine out of 10 countries believe they have free rein in policy making; comparatively, Indian insurance companies have no freedom in issuing customized policy wording. The study goes on to show that enabling insurers to customize policy wording according to risk profile will drive product innovation and will meet customer needs.
- Nine out of 10 countries have freedom in deductions and loss limits because the sum insured is higher. In contrast, the majority of commercial policyholders in India cannot have a loss-limit-based policy or increase their deductible where the amount insured is lower than $350 million in a single location.
- Eight out of 10 countries globally allow flexibility in policy ownership. India, on the other hand, only has access to short-term insurance in non-life policies for a minimum of one year. Auto insurance coverage offers long-term policies, with terms available for up to three or five years.
- Seven out of 10 countries believe they can provide a seamless claims experience to their customers. India, however, has a strong need for simplification and standardization of its claims process, with research predicting improvements in claim settlement times and transparency as a result. Delays in complex and/or large claims also need to be addressed
- Forty percent of countries surveyed said they have end-to-end availability of insurance solutions, whereas in India, insurance brokers are only allowed to sell insurance products while other financial intermediaries are allowed for a wider range of products including insurance. This study calls for a relaxation in the norms by the authorities with regards to insurance brokers
- Eight out of 10 state officials state that risk-based solvency exists for their insurers. In contrast, insurance companies in India need to maintain a solvency ratio of 1.5 times
The study was conducted with senior industry experts in 10 markets, including Australia, UK, France, Singapore, US, China, Hong Kong, UAE, Spain, Germany and India.
“The insurance industry, as a facilitator and major contributor to economic growth, can play a critical role in achieving the goal of ‘Insurance for all’ by 2047,” said RIMS India Chapter NKV chairman Roop Kumar. “The report provides a global benchmark of proven insurance practices, and addresses key aspects such as customer experience, seamless claim settlement and adoption of new technologies. The time is ripe to introduce changes in the insurance industry that will provide choice and options to policyholders and lead to industry growth.”
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