Key developments in the Indian insurance industry in 2020

The on-going coronavirus pandemic changed the landscape of the Indian insurance industry in a big way. The changes are expected to not only increase the insurance penetration rate in the country but also bring a conscious shift in the insurance product-mix. Over the last 10 months, the amount of business that has happened through the protection portfolio has increased by leaps and bounds. Insurance is gradually being witnessed as a pull product from being a push product all this while. For the first time, customers are asking insurers about the right protection products that would meet their needs aptly. Overall the awareness around insurance, as well as the demand for protection products, has witnessed an uptick.

Throughout the year, digitisation was the key pillar that accelerated the growth of the entire insurance ecosystem from marketing and digital policy issuance to claim submission. Also, the way people accepted and adopted digital processes was commendable and a driving factor in the immense growth of the insurance industry. Digitalisation drastically helped insurers – especially life and health – to create and distribute simplified, digital-native solutions in a cost-effective manner.

A massive credit for this significant shift in the consumer’s buying behaviour goes to the Insurance Regulatory and Development Authority of India. The regulator, ever since the onset of the COVID-19 pandemic, has been leaving no stone unturned to make insurance products and services within the maximum reach of the consumers in the most convenient way possible. IRDAI even announced several relaxations for customers in 2020 in view of the unprecedented situation prevailing in the country.

Let us have a quick look at the key changes that changed the face of the insurance industry this year.

Life Insurance Industry

Within a few weeks of the onset of the COVID-19 pandemic, as the country reported over a dozen deaths due to coronavirus infection, there was a sense of fear and anxiety amongst the people if death due to the pandemic will be covered under life insurance policy. To clear the air, insurers on the advice of the IRDAI came forward and clarified that death due to COVID-19 will be treated as a general death and the claim will be admissible if the coronavirus was diagnosed post-policy issuance. The step ensured policyholders are at peace in the time of panic. The pandemic surely made people realise the importance of insurance and especially term and health insurance plans. Within a month of the COVID-19 pandemic, the term life insurance business started gaining traction. In order to make sure that people are able to buy insurance from the comfort of their homes, insurers started issuing policies through tele-medical in place of a mandatory physical medical. This ensured that while people followed lock-down rules and stayed at home, they still had access to adequate coverage.

To support insurers, the regulator – IRDAI – allowed insurers to take approval of customers through e-KYC and video KYC to issue them a policy in place of submitting physical documents, which was not possible during the various phases of lockdown. One of the most important regulations by IRDAI in the year 2020 was directing life insurers to come up with a standard term life insurance product – Saral Jeevan Bima from January 1st 2021. Saral Jeevan Bima is believed to be the right step in the direction of standardizing term insurance plans. The plan will offer decent coverage to the consumers without any restrictions on age, gender, income, occupation and geographical location. As the features and policy wording will be same across all insurers, comparing and buying a term insurance plan would become much easier and convenient for the customers. The standard term plan is an efficient step of IRDAI towards increasing the life insurance penetration rate in India.

Health Insurance Industry

The year 2020 was a year of complete transformation for the health insurance industry as well, as it too went through a pool of transformations to make health insurance within the reach of one and all. Usually, most insurers did not cover hospitalisation due to pandemic under health insurance policy, this created a lot of nervousness amongst the customers. However, with timely intervention of the IRDAI, all general and specialised health insurers were directed to cover hospitalisation due to COVID-19 under a regular health insurance policy and provide cashless treatment to the customers. While all existing health insurance policies started covering the pandemic from day 1, customers buying a new health insurance cover had to serve a waiting period of 15-days. Just like term life insurance, the business of health insurance also started gaining traction within a month of the onset of the COVID-19 pandemic with most insurers reporting a rise in the business by 35 – 40 per cent. In the health insurance industry too, the regulator allowed insurers to issue policy through telemedical, e-KYC and video KYC to limit the movement of people. At the same time, claims are being processed digitally without any need to submit physical documents.

During the pandemic, the regulator wanted to bring maximum people under the insurance umbrella so that they can take the best possible treatment for coronavirus infection. To make it possible, the regulator advised insurers to come up with coronavirus specific insurance plans at the earliest. Adhering to IRDAI guidelines, in the month of July, insurance companies launched two standard COVID-19 health insurance policies – Corona Kavach and Corona Rakshak. Both these policies cover the cost of treatment of COVID-19 and co-morbid conditions, including pre-existing conditions with the tenure ranging from 3.5 months to 9.5 months. Within a few months, over 3 million policies were bought by consumers to stay financially secure. Some other key developments in the health insurance segment include allowing consumers to pay their health insurance premiums in easy monthly instalments. This helped in increasing affordability, as customers are now able to buy health covers with greater sum insured. Inclusion of telemedicine under health insurance cover and coverage for uncovered ailments like mental illness, stress or psychological disorder and age-related disorders under standardisation of health products are some other prominent developments.

Motor Insurance Industry

Just like life and health insurance industry, the Indian motor insurance industry as well went through a few yet significant changes in the year 2020. The insurance regulatory authority decided to scrap the long-term motor comprehensive insurance packages for three years for 4-wheelers, and five years for two-wheelers from August 1st. The step was taken post taking feedback on the way the long term package products were priced and the manner in which they used to function. For customers, the move means deduction in cost of first-year insurance when buying a new four-wheeler and two-wheeler. The step also ensures that the customers do not have to necessarily continue with the same insurer for 4-years if not satisfied with the services offered.

The year 2020 also witnessed the introduction of “Switch On-Switch Off” insurance in motor insurance sector. The plan enables individuals to pay the premium only at the time they need the insurance cover rather than having the insurance for one complete year. Some prominent insurers which came with sand-box products in the category include Edelweiss General Insurance (EGI) – Edelweiss SWITCH and Bharti AXA General Insurance – Pay-As-You-Drive.

(By Amit Chhabra, Head-Health & Travel Insurance, Policybazaar.com)