Bancassurance means selling insurance product through banks. Banks and insurance company come up in a partnership wherein the bank sells the tied insurance company's insurance products to its clients. Globally, bancassurance has emerged as an important channel for distribution of insurance products. Various international studies have shown that a bancassurance strategy has indeed saved costs of insurance companies in the long run.

1. Recent Industry Trends
Part 5
Indian Insurance Industry: Reaching out to
Exponential Growth

2. Recent trends in the Indian
Insurance Sector
a. Bancassurance is emerging as a major channel for distribution of insurance
products-
Bancassurance means selling insurance product through banks. Banks and
insurance company come up in a partnership wherein the bank sells the tied
insurance company's insurance products to its clients. Globally, bancassurance
has emerged as an important channel for distribution of insurance products.
Various international studies have shown that a bancassurance strategy has
indeed saved costs of insurance companies in the long run.

3. Recent trends in the Indian
Insurance Sector
In India, the concept of bancassurance was first introduced in 2000 when
insurance sector was opened for the private sector. Post 2010, bancassurance
has emerged as a major channel for distributing insurance products given
their reach with retail customers. Driven by a large captive customer base,
banks’ strong brand recognition, and growing branch network, banks have
been able to successfully sell insurance as an add-on product with other
banking products. In September 2015, the bancassurance model received a
further push, with the insurance regulator notifying a new framework for
corporate agents, which allowed banks to tie up with up to three insurers
each in life, non-life and health insurance segments to increase the
penetration.

4. Recent trends in the Indian
Insurance Sector
It is expected that this channel will emerge as a dominant distribution channel in
next five to ten years. Rapid increase in banking network and low cost of
managing this channel are likely to make bancassurance a powerful as well as
popular channel. The share of banks in individual new business premium has
increased from 39.0% in 2011-12 to 47.4% in 2014-15.

5. Recent trends in the Indian
Insurance Sector
b. Growing online channel is quickly emerging as a cost effective model for
distribution of insurance products
Insurance companies are also exploring other cost-effective modes of
distribution such as the ‘online channel’. As per estimates by BCG, the overall
online market for insurance sector stands at around 1% for both life and non-
life segments. In life insurance, term plans are the most bought product
online, while in non-life, it is motor, health and travel insurance. The online
market has grown six to seven times in the past six to seven years. This
channel is expected to gain significant momentum in the coming years as
insurance awareness grows among people.

6. Recent trends in the Indian
Insurance Sector
c. Launch of new and innovative products with high levels of customization
With the passing of the Insurance Laws (Amendment) Bill 2015, the sector
has witnessed a fresh inflow of capital, and introduction of new and
innovative products. Post the approval of 49 per cent direct foreign
investment in the sector, new players have entered the market leading to
more, new and innovative product offerings for consumers to choose from.
Further in a move towards providing customized insurance, more number of
life insurance to general insurance players are offering a customized insurance
plan based on certain fixed parameters and guidelines. Amongst all the
insurance segments, health insurance has witnessed maximum innovation-
Life stage based plans, city based plans, and many new innovative products
are being introduced by various insurance companies to tap the health
insurance market.

7. Recent trends in the Indian
Insurance Sector
d. Digital technologies are expected to transform insurance business-
The role of technology has brought about a major change in the sector. As per
a recent report from Accenture, it is expected that the next wave of
technology- Internet of Things (IoT), platform-based ecosystems and artificial
intelligence will significantly change and transform the very nature of the
insurance industry.
The emerging digital technologies- intelligent automation, liquid workforce,
platform economy, predictable disruption and digital trust are offering
insurers an opportunity to shift from their traditional business model to
automated models which they can automatically assess and price risk directly,
individually and in real-time. This digital transformation in insurance
companies will involve continuous disruption to existing business models,
products, services and experiences enabled by data and technology.

8. Recent trends in the Indian
Insurance Sector
Digital services offer convenience, choice and comparison. Digital
technologies can be rooted across the core elements of the insurance value
chain, right from product development to claim settlement. Many Insurers
are now using technology to track all its potential claims, thereby speeding up
claim verification. Moreover, these technologies enable insurers to leverage
historical data for predicting future patterns so as to gain a deeper
understanding of the emerging needs of their customers, partners and
employees. This information can be used to build a suitable digital strategy.

9. Recent trends in the Indian
Insurance Sector
An effective digital strategy can allow insurers to reduce customer service
costs, increasing customer fulfilment and retention, while enhancing process
efficiency. As a part of their digital strategy, increasing number of insurance
companies are developing mobile applications to meet the growing demand
for real time services among smartphone users. The mobile applications also
offer a significant potential for enhancing customer service experience in the
form of speedier sales closure, better access to policy details and making
hassle-free renewal payments.
As per a recent EY global Digital Survey it was found that insurers who
developed a digital strategy were more successful than their competitors at
reducing customer service costs while increasing customer loyalty.

10. Recent trends in the Indian
Insurance Sector
e. Growing market share of private players in the life insurance segment
The share of private sector in the life insurance business has witnessed a
marginal increase in the FY15 over FY14. On the basis of total premium
income in life insurance business, the share of private insurers has increased
from 24.61 per cent in 2013-14 to 26.95 per cent in 2014-15. Private insurers
gained market share mainly because of high growth recorded in
bancassurance channel. Moreover, rationalization & transparent pricing along
with the smart interplay of digital and technology push has helped private
insurers to market and deliver products better than before, thereby resulting
in an increased share in the overall business.

11. Recent trends in the Indian
Insurance Sector
f. Regulatory reforms to promote a competitive environment in both the life
and non-life insurance sectors
The regulatory framework in the country aims at providing transparency,
simplifying products and services and creating a favorable business
environment for all the stakeholders in the insurance sector. However, the
recurring changes in regulations continued to upset the business models of
many insurers during the last 10 years.

12. Recent trends in the Indian
Insurance Sector
While a number of
changes in the recent
past had an adverse
impact on the sector,
some of the recent
regulatory
developments that
have impacted the
sector favorably are-

13. Recent trends in the Indian
Insurance Sector
Insurance Laws (Amendment) Act 2015: This regulation has had a favorable
impact on insurers in multiple ways-
a) Increase in insurance FDI limits- The Insurance Laws (Amendment) Bill was
passed in March 2015, increasing the FDI limit to 49 per cent from 26 per
cent. This move was aimed at bringing in more foreign capital, technical
know-how and exposure to global best practices for the Indian insurance
industry. The increase in foreign investment cap has already brought in nearly
Rs. 15,000 crore into the domestic insurance sector in the past year. Post the
announcement, many global majors have evinced interest in raising stake in
their Indian subsidiaries. The list of foreign investors who have announced
plans to increase stakes in their ventures includes French insurer Axa, Japan's
Nippon Life and Mitsui Sumitomo Insurance, Bupa of United Kingdom and
Dutch insurer Aegon, BNP Paribas Cardif, IAG, Aviva, Standard Life, AIA, QBE
and Fairfax have also announced plans to increase stakes in their ventures.

14. Recent trends in the Indian
Insurance Sector
b) Abolition of standard prescribed expense limits- The new law eased the
regulation around insurer’s annual management expenses. The earlier law
limited the insurer’s ability to expand into newer territories involving high set
up costs. As per the new provisions IRDA has been authorized to regulate
management expenses of insurers, thereby bringing in more flexibility to
define expense limits.
c) Relaxed provisions for payout to agents -The new law has removed the
restriction of maximum payout to agents or any other intermediary. Under
the new provisions, the regulator is expected to regulate the commission at a
product level, thereby ensuring meeting of product margins.

15. Recent trends in the Indian
insurance sector
d) Task of hiring agents assigned to insurers- The new regulation allows the
regulator to frame rules regarding the agent’s eligibility, qualifications and
other related aspects. In an attempt to make the agent hiring process more
consultative, the insurers have been permitted to appoint the agents without
any intervention from the regulator.
e) Withdrawal of requirement of deposit with the RBI- Insurers were earlier
required to maintain a deposit of USD 1.5 mn with the Reserve Bank of India.
In the amended bill, this requirement has been waived off, offering flexibility
to new insurers with lower top-line to effectively deploy this additional fund.

16. THANK YOU
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out-to-exponential-growth/