Insurance Article, The Insurance Times 2022, The Insurance Times March 2022


The role of insurers is changing from a risk transfer company to a risk prevention and management one. Insurance was always a push product. It was not even a secondary, but a tertiary product. With digitisation, insurance is becoming a primary product and many of the start-ups have realised that insurance creates a great pull for their business model. For insurance companies, insurtechs is an extended way of creating a conceptual promotion of their product. Customer engagement has been one of the pain points for insurers, historically. This is where technology is playing a critical role. Insurance in India is seen as a white elephant by customers largely due to experiences such as lack of transparency in plans, difficulties in claim filings and minimal education within the customer base on how to make these choices. When it comes to India’s insurance industry, one is aware that the market is underpenetrated and underserved. While lower in comparison to global average it is worth noting that India’s insurance penetration in FY21 stood at a higher 4.2 percent as compared to 3.76 percent a year ago. A report by Mordor Intelligence projects that the insurance market in India will grow at a compound annual growth rate (CAGR) of 7 percent till 2025. The overall market size is currently at around $250 billion, of which insurtech players form only 10 percent. Out of the expected growth parameters insurtech has to grab the lion’s share of the new business.

Customer service and the customer experience are becoming an important competitive differentiator in the insurance industry. At least 30 percent of first-time insurance buyers over the next few years will be the younger population in the age bracket of 16 to 21 years. They are digital natives and their buying experience and expectations around their experience will be completely digital.  Insurtech aggregators and brokers will grow five-fold over the next few years. Back-end service providers and pure tech insurance service provider companies are likely to see year-on-year growth. Motor insurance is set to rise this fiscal as post pandemic economic recovery gathers momentum. Motor insurance premiums have to grow at around 6% to 8% driven by any increase in third party insurance rates and higher auto sales. Furthermore, given that 57% of the vehicles on road are not insured (Insurance Information Bureau of India (Motor ARFY19)), bringing a portion of these vehicles under coverage would add heft to the industry growth. However, given that no increase in the motor TPI premium has been announced, the sector is expected to witness pressure on near-term profitability. Furthermore, lower auto sales, high lapse-ratio (especially in the two-wheeler segment), unfavourable changes in macro-economic factors, and uncertainties in the regulatory landscape could be characterised as key challenges to the industry growth. Digital issuance and online channels are expected to contribute to faster growth in this segment, together with a large number of uninsured vehicles in India.

Motor Insurance Portfolio:

When it comes to motor insurance in India, every driver has to carry at least a minimum of a third-party insurance policy, as per the Motor Vehicle Act. To drive a vehicle without insurance is a punishable offence. The law was drafted and brought in effect to safeguard the interest of a third party that suffers injuries or property damage due to an accident with the involvement of an insured vehicle. However, the own-damage insurance cover is optional, while the personal accident cover is necessary only for the owner-driver of the car. Motor insurance premium has grown from Rs.15,343 crore in FY10 to Rs.67,764.7 crore in FY21 at a compound annual growth rate (CAGR) of 14.5% as motor vehicles on road have doubled in the last six years and third party insurance (TPI) has been made mandatory in India. TPI protects vehicle owners from any financial liabilities caused by injury or damage to third party life or property due to use of vehicles. Though business has grown in the last 11 years gross premiums declined 1.67% in the fiscal ended March 2021 due to a slowdown in the auto sector which was hit by restricted mobility due to a national lockdown in the first half of the year. To be sure though motor insurance premiums have increased over the last year, they are yet to reach the pre-pandemic levels as auto sales are yet to reach similar levels.  But signs are that things are picking up this fiscal for example in August 2021 the gross premium collected increased to Rs 23,500 crore up 5.9% from Rs 22,200 crore in August 2020. Growth in fiscal 2021 also suffered as there was no revision for the prevailing TPI rates. The annual growth rate for FY10-FY20 was 16.2%, while the growth rate for FY10-FY19 was 17.3%, highlighting the slowing growth momentum in the last couple of years in this segment.  57% of vehicles, mostly two wheelers are uninsured as of March 2020 down from 60% as of March 2018, indicating a higher number of vehicles which are getting into the insurance bucket.

Ease of business:

Companies are going beyond their conventional approach to reach out to consumers in a way never experimented before. The biggest advantage of an online process is that it encourages a consumer to take extra effort to clearly understand all aspects of the insurance policy they are opting for. It also puts an onus on the consumer for the decisions they make with respect to their choice of the policy cover. Most online marketplaces in India assist consumers in making advanced digital payments and offer various options to pay for their policies. For example, users can pay via any means of digital payments—debit cards, credit cards, digital wallets or direct bank transfers—bringing transparency in the payments process. Emerging trends such as cashbacks and systematic monthly payment plans make buying an insurance policy on online marketplaces interesting. Among some of the popular online marketplaces for the sale and purchase of motor insurance policies in India are BankBazaar, Coverfox, InsuranceDekho, PolicyBazaar and PolicyX. Global technology companies have identified financial services, such as the payment space, and specifically digital wallets and insurance, as a way to convert their large databases of consumers into diverse business opportunities. These technology companies eyeing a pie of the large insurance market in India indicates how rapidly the market is evolving to suit consumers’ changing preferences and provides them the ease of access and processes. Irrespective of the distribution channels deployed to sell an insurance cover, the onus to create consumer-friendly motor insurance policies and offer them to consumers in the easiest possible way still lies on India’s motor insurance companies. Realizing the latent consumer need and potential of technology, companies are designing risk based solutions for motor insurance different from the conventional motor insurance so far.

Claim Turn-Around-Time (TAT):

The general insurance industry in India is changing after its digitization. Insurance providers are becoming more transparent and claim-friendly. The claim process is continuously upgraded to make it trouble-free. Motor insurance protection is essentially the safety net that safeguards you and your vehicle from all unpleasant eventualities. So, as the policyholder, you are expected to be well aware of what is covered under the plan and what is not. Reading through the policy documentation is the best way in which you can get first-hand information about the plan coverage. Insurance is not an ‘over the counter’ physical product or an instant service. It is a promise. And the insured people expect the company to fulfill the promise at a time when they need it the most, which is during troubled times such as an accident. The most common instances of claim of the vehicles are as follow:

  1. Loss or damage to the insured vehicle.
  2. Theft of the insured vehicle or parts of the vehicle.
  3. Personal accident to owner-cum-driver
  4. Third party property damage
  5. Third party injury, disability or deaths in an accident

First three kinds of losses are settled by the insurers themselves while 4th & 5th are finalized by courts (MACT/WC). In own damage claims, it is important to consider the claim turn-around-time of claim settlement. When the insured raises a vehicle insurance claim, he expects the insurance company to settle it at the earliest. It is better to choose from insurance companies that settle the claims at the earliest. Companies that take the minimum time to settle claims offer the peace of mind. Getting the vehicle repaired at a cashless garage is the most optimum way in which insured can proceed after a devastating accident. The services offered at cashless garages are of the best quality. The use of latest equipments and the presence of informed personnel ensure that there are minimal delays in the repair work. Most network garages offer a 6-month quality assurance certificate for all repairs done there. Some insurers offer free pick-up, towing assistance, and car wash facility when you opt for cashless claim settlement. When submitting a claim, customers also want a seamless, rapid and individualized process.

Pay claim even if vehicle sold to 3rd party:

The state consumer court has upheld a district consumer forum direction to an insurer to clear a Bengaluru woman’s Rs 1.4 lakh insurance claim towards her stolen motorcycle. The insurer had turned down her claim, saying the vehicle’s insurance policy was still in the name of the first owner and hadn’t been transferred to her.  Liberty Videocon General Insurance Ltd had appealed against a Bengaluru district consumer forum’s June 30, 2020 verdict ordering that the insured value of the vehicle — Rs 1,37,824 — be paid with interest to Sheela Shantharaj, 57, of Kuvempunagar, apart from Rs 10,000 towards damages and Rs 5,000 towards litigation cost.  Sheela purchased a Bajaj KTM Duke 200 motorcycle on April 27, 2017 from its original owner Mahesh P by paying Rs 1.5 lakh. On June 2, 2017, the motorcycle was stolen from her residence and she lodged a complaint with Chandra Layout police.

With the vehicle carrying an active insurance policy in the name of the original owner till September 26, 2017, Sheela approached the insurer, Liberty Videocon General Insurance Ltd, for a claim for the stolen bike. But despite an active policy in place, the insurance firm turned down her claim, stating that the vehicle was yet to be transferred in her name and she had failed to apply for an insurance transfer till the time of theft.  Next, the woman approached a local consumer court, which ruled in her favour. It ordered the firm to pay Rs 15,000 compensation for the delay, apart from granting her the insurance claim of Rs 1,37,824. Claiming that the local court erred in its judgment, Liberty Videocon General Insurance appealed to Karnataka State Consumer Disputes Redressal Commission on October 22, 2020.  The judges, however, noted that on the date of theft, the vehicle was under insurance cover and the complainant intimated the firm for settlement of the claim and also lodged a police complaint. Further, she had requested the RTO for transfer of vehicle ownership and the stand taken by the insurer.

Simplification of Road Traffic Accident Claims:

Bihar ranks 15th in India in terms of road accidents and ninth in terms of fatalities arising out of them, as per the latest data released by the ministry of road transport and highways (MoRT&H) in 2019. Bihar had only 9.3 recorded cases of road accidents against the national average of 34.2 per lakh population in 2019.  With a score of 11.7, it ranked 22nd in terms of accidents per 10,000 vehicles.  Bihar will be the first state to simplify claims of road traffic accident (RTA) by removing the victim or their dependents from the litigation process and paying them an interim ex-gratia amount of Rs.5 lakh within 15 days in event of death.  The state will also take the onus to contest the case in court, on behalf of the victim, if the insurance firm of the accused vehicle owner, decides to challenge the order. The state will implement the new amendment to the Bihar Motor Vehicle Rules that empowers the state transport appellate tribunal to settle all such accident claims within 60 days. The new amendment was notified in the Bihar gazette on August 11 after a cabinet order.

So far, road traffic accident claims are tried in the civil court and linger for years.  This is the first of its kind initiative in India to simplify accident claims. The new rules allow immediate payment of Rs.5 lakh as interim compensation for death and Rs.50,000 for grievous injury to dependents or victims of road traffic accidents, involving vehicles that are insured, uninsured or involved in hit-and-run case. The compensation for grievous injury is proposed to be increased from Rs.50,000 to Rs.2.5 lakh.  As part of the new rules, victims or their relatives will not have to run from pillar to post for settlement of claim. The state will pay the interim compensation and also take the responsibility of fighting a legal suit on behalf of the victim if an insurance firm were to challenge its order.

The state has set up a revolving corpus of Rs.50 crore under the Bihar motor vehicle accident assistance fund through which such payments will be made. In case of insured vehicles, the state will pay the compensation to the victim or their dependents through the corpus fund and recover the amount from the insurance firm after the tribunal settles the case within the stipulated 60 days.  For uninsured vehicles, the state will recover the compensation amount by auctioning the vehicle if its vehicle owner is unable to pay the compensation to the victim’s family. Should the amount realised through auction be less than the compensation fixed, the state will bear the difference amount through the Bihar motor vehicle accident assistance fund.

Nearly 20% of the 13.60 lakh registered vehicles in the state till 2019-20 do not renew their insurance.  For hit-and-run case, the compensation amount will be borne through the corpus fund and replenished partially by the Centre through insurance companies, which pay Rs.50,000. The state will bear the remaining Rs.4,50,000 in deaths involving hit-and-run cases.  Under the changed rules, all sub-divisional officers (SDO) will be the accident claim inquiry officer and district magistrates (DM) the accident claims assessment officer. The SDO conducts the inquiry on the basis of site inspection done by the police and the motor vehicle inspector.  The changed rules do not mandate any site inspection or examination of witness at the trial stage. If challenged, the case will be adjudicated on the basis of a summary trial based on the petition of the victim or their relatives, deposition by the insurance firm and reports by the police, the SDO and DM.  In case the tribunal or a higher court awards a higher compensation, the difference of the amount already paid as interim compensation would be credited into the bank account of the victim’s family. However, in case of an adverse order for the government, the interim amount already paid as compensation to the family of the victim will not be taken back but adjusted through the Bihar motor vehicle accident assistance fund.

No Insurance Claim if Vehicle Driven Without Valid Registration:

Supreme Court has come out with the observation that car insurance claim for vehicles without valid registration can be denied. The observation was made on Saturday when Supreme Court rejected an insurance claim of a car with temporary registration which was reportedly stolen.  United India Insurance Company Limited, one of the public sector general insurance companies in India, filed an appeal against the claim. United India Insurance had challenged an order of the National Consumer Disputes Redressal Commission which dismissed the company’s petition challenging an earlier redressal in Rajasthan. The vehicle, a Mahindra Bolero with an insured sum of Rs. 6.17 lakh, had expired 10 years ago.  The top court dismissed the insurance claim saying there is a fundamental breach of the terms and conditions of the policy. What is important is this Court’s opinion of the law, that when an insurable incident that potentially results in liability occurs, there should be no fundamental breach of the conditions contained in the contract of insurance.

The Supreme Court made the observation, noting that the Bolero SUV had been driven without a valid registration on the date of theft. The offence is a violation of Sections 39 and 192 of the Motor Vehicles Act, 1988. This results in a fundamental breach of the terms and conditions of the policy, as held by this Court in Narinder Singh (supra), entitling the insurer to repudiate the policy. This court is of the opinion that the NCDRC’s order cannot be sustained.  The owner of the vehicle had bought the insurance policy in Punjab, despite being a resident of Sri Ganganagar, Rajasthan. 10 years ago, his vehicle was stolen from a parking lot in Jodhpur. He lodged an FIR at Jodhpur alleging commission of offences under Section 379 (theft) of the Indian Penal Code. Few months later, the police lodged a final report stating that the vehicle was untraceable.

Insurers to develop app to allow faster motor accident claims payments:

The Supreme Court has rejected a request from insurance companies for more time to develop a mobile application for use nationwide by victims of road accidents, police; motor accident claims tribunals and insurance companies for the speedy settlement of compensation claims. During a hearing on the matter, the court heard that the insurance companies were willing to develop a mobile app if certain specific directions were given by the court. In response, the top court said, “The directions given earlier are comprehensive enough. The insurance company cannot wriggle out of the directions. Either they are able to develop it or we would call upon the government to develop an app which would have to be imposed on the insurance companies.” The top court gave the insurers a period of two months to complete the task. The court had on 16 March 2021 and 3 August 2021 passed detailed orders in this regard. It had allowed the General Insurance Council (GIC) to launch a mobile application where first information reports (FIRs), detailed accident reports and photographs can instantly be uploaded by police and tribunals across the country and allow uniform access to insurance companies for speedy processing of claims. People have gradually started looking at contactless or zero touch services where they do not have to come in physical contact with a third party.

Customers place a high value on an easy process and individualized options and want to buy from insurance companies that serve up comprehensive policy information that is tailored to their specific situation. Across all purchase options, the human factor (or personal contact) is a crucial component of converting a prospect into a customer. A growing population of 1.38 billion and the soaring aspirations of India’s populace are presenting the opportunity for motor insurance companies to tap large volumes of prospective consumers. To understand the effect, firstly one needs to know the importance of motor insurance. It is the second-largest business segment of the insurance industry that contributes around 40 percent of the total premium collected by the general insurance companies, in which approximately 41 percent of the premium share comes from the own-damage insurance cover that the court has made mandatory. The Indian auto insurance consumer is not really risk-averse but risk-loving, considering at least 58% vehicles registered in India are still uninsured despite third-party insurance being mandatory. Besides, at present, almost 65-70 percent of the two-wheelers running on the roads avoid the possession of own-damage policy by the second year, while approximately 20 percent to 30 percent of the four-wheelers tends to shun the owning of own-damage policy by the fourth year. It shows the scope of coverage lies under this own-damage insurance cover. Driving without a valid insurance can be a huge problem and you can end up in paying penalty of Rs 2000 for first offence, Rs. 4000 for subsequent offence as per amended Motor Vehicle Act 2019. Liability only policy (Third party insurance) is mandatory for all vehicles, at least liability only policy should be renewed as there to use vehicle in public place as per Motor vehicle Act 1988. These changes in the automotive insurance industry can be largely attributed to innovations happening within the mobility space. Technological evolution has brought about disruptions in mobility, resulting in connected, autonomous, shared and electric (CASE) solutions. This, in turn, has resulted in new types of risks in the mobility landscape that needs to be covered by insurance, thereby making traditional insurance solutions redundant and further requiring a change in the way insurance is assessed.

It has to be kept in mind that the Motor Vehicles Act is a piece of welfare legislation and its purpose is to provide prompt compensation to the persons suffering injuries in a motor vehicular accident or to family members of such persons unfortunately dying in such road mishaps. Insurance is considered as a technical product in India and probably that is the reason for its lower penetration. The industry should opt for designing the products with very simple wordings so that there shall be real consensus in them. Transparency at the time of claim is another very important aspect and there should be customer delight at the time of claim settlement. The “DIY” (Do it yourself) approach is disrupting the way insurance is consumed in India. Consumers are now exploring three main avenues for their motor insurance covers and insurance companies are putting their best foot forward in expanding their presence in all the three spaces. The online purchase and claims settlement process is very simple if the consumer has the Indian government-mandated Aadhaar Card, which is considered a valid proof of a person’s identity, place of residence, mobile number and linked bank accounts. Usage-based policy models are really the way ahead to give value to the consumers without compromising on profitability. The Covid -19 pandemic and lockdown had brought down motor claims in the initial months but they have started coming back to normal. Meanwhile, industry data indicate some traction in motor insurance premium in recent months. The market for insurance for electric vehicles (EVs) is still in a nascent stage. As the market evolves, it is likely to lead to more data surrounding EV battery performance and fires, lower component costs, and a developed used-part and aftermarket channel, all of which will attract innovative insurance business models. In the insurance industry, the insurer-customer relationship is a valuable competitive differentiator throughout the entire customer journey from the initial consultation through to support and claims.

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