The insurance ecosystem in India is primed for change as the digital push from smartphones and internet penetration gains momentum. Consumers are already accustomed to the ease of online experiences. That means insurers and their distribution channels will need to evolve quickly.
So far, insurance tech companies have been driving the evolution of digital insurance with help from a slew of advanced technologies. Now, they have help from the policymakers. A series of new rules from the Insurance Regulatory and Development Authority of India (IRDAI) is expected to nudge insurance players into a new era.
New rules from IRDAI: What’s coming up
Four significant amendments could bring flexibility and agility to the insurance space. It will be interesting to see how the changes pan out for enterprises that sell insurance online and for the insure tech businesses that support their insurance platforms.
More options for corporate agents: Banks could soon be offering insurance products from up to nine insurers. The new rule may be implemented in September 2022 and is part of IRDAI’s open architecture policy. The insurance regulator took baby steps in this regard back in April 2016. A new ruling introduced at the time permitted corporate agents (like banks) to sell policies from up to three insurance carriers.
More leeway in fundraising: Insurance companies will no longer need prior IRDAI approval to raise funds via debt funds and preference shares. Removing this obstacle will enable insurers to raise capital more freely and in line with their business goals and strategy.
Caps on account management costs: A proposal to modify the account management expenses of insurance carriers is also in the pipeline.
General and health insurers: Account management expenses will be limited to 30% of the gross premium.
Life insurers: Account management expense caps will vary widely, ranging from 0.01% to 80%.
Limits on account management expenses should lead to restructuring policy commissions and other remunerations. IRDAI’s goal here is to make insurance more affordable for the consumer.
Lower entry barriers in future: Currently, new entrants to the insurance sector need a minimum paid-up capital of Rs 100 crore. To ease the barriers to entry, IRDAI is proposing to scrap the high minimum capital requirements. The suggestion instead is to determine suitable entry fees based on company size and operational scope.
Implementing such a proposal would allow multiple smaller carriers to service the Indian insurance space. It could herald the emergence of microinsurance and niche insurance products.
New IRDAI rules and insurance tech
With the regulator pushing its deregulation agenda, the prospects for insurance tech companies are very bright. Take a look at how the new rules could boost digital insurance and, in turn, support insurtech businesses.
Focus on distribution:
Implementing fewer regulatory requirements for fundraising is a good step for the insurance business. Now that carriers need no IRDAI approval to raise capital from the debt market (and elsewhere), they can focus their attention on why they need the capital and how best to use it.
Add on the account management expense caps, and insurers are looking to minimise operations costs to increase profits. How can they accomplish this? Better distribution channels are key, and insurance tech can help by supplying low-code application programming interfaces (APIs).
An insurance API like Turtlefin’s OneAPI can potentially turn any online sales channel into a digital insurance platform. That online channel could belong to a bank, an eCommerce site, a high-end retailer, an online financial services provider, and so on. By partnering with insurtech players, both insurance carriers and non-insurance businesses could introduce new ways to sell insurance online.
Convenience for customers:
In extending the number of carriers banks can partner with, IRDAI has got it right. Consumers appreciate having policy options. What do they appreciate even more? Receiving policy offers that are tied in with their needs. Technology can help with that as well.
Insurtech partners like Turtlefin provide tech solutions to ensure frictionless insurance purchases for the end user. What does that look like?
Shopping for digital insurance via brands that the customer already trusts (e.g. Amazon, IKEA).
Receiving personalised policy offers at the right time (e.g. asset insurance when shopping for fine jewellery online).
Being able to buy insurance while making other transactions without having to click through to a separate window or app.
In short, any digital point of sale becomes an insurance platform.
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When insurers have more operational agility, they can focus on building these partnerships. Insure tech businesses help insurance carriers develop these alliances indirectly, all thanks to the power of software.
Charting a new course
The insurance ecosystem is advancing on new digital rails, and insurance tech companies like Turtlefin are leading the charge. How? By helping corporate organisations such as banks to capitalise on a highly lucrative opportunity.
An online poll we ran recently asked people what they thought would attract banks to tie up with insurtech companies. The top two responses were the option of multiple insurers (38%) and low operation costs (30%). These were followed by an additional income channel (23%) and less policy servicing time (10%).
Our insurance API and other tech-forward solutions can meet all these goals. Turtlefin has expertise in both insurance and technology to create a seamless journey for your customers and staff. Leading banks have already used our support to upgrade their insurance distribution and data management.
And now, with IRDAI laying the groundwork for an insurance space that is light on regulations, exciting developments will be in store. Insurance businesses and corporate agents must act quickly to make the most of a unique opportunity.
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