NEW AVENUES IN INSURANCE SECTOR

Introduction to Insurance industry in India:-

The insurance industry of India consists of 53 insurance companies of which 24 are in life
insurance business and 29 are non-life insurers. Among the life insurers, Life Insurance
Corporation (LIC) is the sole public sector company. Apart from that, among the non-life
insurers there are six public sector insurers. In addition to these, there is sole national re-insurer,
namely, General Insurance Corporation of India (GIC Re). Other stakeholders in Indian
Insurance market include agents (individual and corporate), brokers, surveyors and third party
administrators servicing health insurance claims.

Out of 29 non-life insurance companies, five private sector insurers are registered to underwrite
policies exclusively in health, personal accident and travel insurance segments. They are Star
Health and Allied Insurance Company Ltd, Apollo Munich Health Insurance Company Ltd, Max
Bupa Health Insurance Company Ltd, Religare Health Insurance Company Ltd and Cigna TTK
Health Insurance Company Ltd. There are two more specialised insurers belonging to public
sector, namely, Export Credit Guarantee Corporation of India for Credit Insurance and
Agriculture Insurance Company Ltd for crop insurance.

Market Size
During April 2015 to March 2016 period, the life insurance industry recorded a new premium
income of Rs 1.38 trillion (US$ 20.54 billion), indicating a growth rate of 22.5 per cent. The
general insurance industry recorded a 12 per cent growth in Gross Direct Premium underwritten
in April 2016 at Rs 105.25 billion (US$ 1.55 billion).

Indias life insurance sector is the biggest in the world with about 360 million policies which are
expected to increase at a Compound Annual Growth Rate (CAGR) of 12-15 per cent over the
next five years. The insurance industry plans to hike penetration levels to five per cent by 2020.
The countrys insurance market is expected to quadruple in size over the next 10 years from its
current size of US$ 60 billion. During this period, the life insurance market is slated to cross US$
160 billion.
The general insurance business in India is currently at Rs 78,000 crore (US$ 11.44 billion)
premium per annum industry and is growing at a healthy rate of 17 per cent.
The Indian insurance market is a huge business opportunity waiting to be harnessed. India
currently accounts for less than 1.5 per cent of the worlds total insurance premiums and about 2
per cent of the worlds life insurance premiums despite being the second most populous
nation. The country is the fifteenth largest insurance market in the world in terms of premium
volume, and has the potential to grow exponentially in the coming years

Road Ahead
India's insurable population is anticipated to touch 750 million in 2020, with life expectancy
reaching 74 years. Furthermore, life insurance is projected to comprise 35 per cent of total
savings by the end of this decade, as against 26 per cent in 2009-10.
The future looks promising for the insurance industry with several changes in regulatory
framework which will lead to further change in the way the industry conducts its business and
engages with its customers.
Demographic factors such as growing middle class, young insurable population and growing
awareness of the need for protection and retirement planning will support the growth of Indian
insurance.
Due to the fast growth rate and huge market size Insurance companies need to explore new
avenues in insurance sector.

New Avenues

Auto-insurers are shifting toward Usage-Based Insurance

Auto-insurers are shifting toward Usage-Based Insurance, which will help them to enhance their
claim handling capabilities and enable them to perform better customer segmentation
Background Usage-Based Insurance (UBI) implements the concept of writing the premium for
auto-insurance based on usage and/or driving behavior Vehicle telematics (in-car installed
devices to transmit data in real time) is widely used to estimate the usage of a car, including
driving pattern and driving behavior
Key Drivers
Rapid growth of smartphone capabilities including GPS, accelerometers, and g-force tracking,
which can enable mobile apps to replace telematic devices Increased ownership of connected
cars with built-in embedded telematics systems Vehicle theft detection systems and other valueadded services can be integrated with the telematics system, which aims to increase customer
safety

Increasing Demand for Cyber Insurance

As more businesses want to protect themselves from unforeseen cyber attacks, the demand for
cyber insurance is increasing and it is expected that cyber insurance may become a default
choice for many companies Background Though companies have an information security
division and several best practices to prevent cyber crime, it is impossible to ensure complete
protection from cyber crimes: This is due to non-availability of sound technical solutions,
vulnerable security products, problems in implementing security solutions, and human errors
Key Drivers Since complete elimination of cyber risk is not possible, the second best option for
businesses is to transfer the cyber risk for a premium Some insurance companies provide valueadded services, which can help businesses prevent/handle a cyber attack
Trend Overview Cyber risk has been termed as a potential global threat by the World
Economic Forum: The global financial impact of cyber crime is estimated to be around $575
billion7 The increase in cyber threats are the prime reason for the current need of cyber
insurance: Though cyber insurance has been available for over ten years, it was not widely
adopted due to lack of data, lack of awareness among users and legal hurdles The various
damages that are covered under cyber insurance are intellectual property theft, business
interruption, data and software loss, cyber extortion, cyber crime/ cyber fraud, breach of privacy
event, network failure liability, impact on reputation, and physical asset damage

Emergence of Peer-to-Peer Insurance

Peer-to-peer insurance is an emerging concept, which can provide insurance at low cost. If this
model is widely adopted, established insurance firms will face tough competition
Background
The peer-to-peer insurance business model teams up individuals who agree to pool their
insurance premiums, with losses compensated using the pooled money. The left-over money is
again divided among the individuals The peer-to-peer concept is an emerging concept with very
few players in the insurance industry in the U.S., U.K. and Europe
Key Drivers If the cost of insurance is reduced, many uninsured people will buy an insurance
policy Customers want speedy claims processing
Trend Overview The peer-to-peer insurance model is expected to gather widespread adoption
in emerging as well as mature markets: In emerging markets, the reduced premium cost will be
an incentive for adopting the peer-to-peer insurance model In mature markets, good Internet
connectivity and commoditized insurance product lines will be key drivers to adopt the peer-topeer insurance model In peer-to-peer insurance, the cost of insurance is reduced by the
following ways: It is expected that there will be a drop in fraud because everyone is connected

socially and it can reduce the premium paid by the policyholder Policyholders will use their
private information to decide whom to connect with, rejecting bad risk profiles There can be a
reduction in process costs because the small risks will be handled using the networks payback
The cost of sales for the business model can be reduced because of its ability to onboard new
customers through the customers network The administration cost will also decline because of
the expected reduction in the number of sales agents and better risk profiles.

Insurance for high tech projects

High-tech projects investment occupying large funds and with many uncertainties, in the
investment process many unpredictable risks are there, so some enterprises have suffered huge
losses in the projects investment process due to ignorance of risk assessment or using improper
assessment methods. So insurance companies provide insurance cover for high tech projects
The risks insurance of high-tech projects covers : R&D risks, technology risks, production risks,
management risks, market risk and environmental risk.

R&D Risks
R&D risk refers to the uncertainty of the expected R&D goal because of the changes in the R&D
activities, including theoretical foundations, human resources, information resources and R&D
conditions
Production Risks
Production risks refer to the uncertainties caused by the changes the level of production
equipment, production personnel constitution, raw material supply and so on. It runs through the
entire production process
Market Risks
Market risks refer to the uncertainty of market competition advantages lead by a variety of
internal and external factors including market prospects, product competitiveness, potential
competitors, marketing abilities, and so on

Credit risk insurance

Credit risk is the risk due to uncertainty in a counterparty's (also called an obligor's or credit's)
ability to meet its obligations. If another party fails to perform them in time i.e. If the
party fails to pay the credit. So insurance covers are made for the financial effect of
non-payment of reinsurance and of the nonpayment of premium debtors

In assessing credit risk from a single counterparty, an insurance company consider three issues:
Default probability: What is the likelihood that the counterparty will default on its obligation
either over the life of the obligation or over some specified horizon, such as a year? Calculated
for a one-year horizon, this may be called the expected default frequency.
Credit exposure: In the event of a default, how large will the outstanding obligation be when
the default occurs?
Recovery rate: In the event of a default, what fraction of the exposure may be recovered
through bankruptcy proceedings or some other form of settlement?

Burial Insurance This is a practical way to ease the burden of your funeral expenses on your family
and the loved ones you leave behind in the unfortunate event of death. The cover addresses all your
funeral costs.
Wedding Insurance The cover comes in handy when certain aspects of your wedding go wrong. For
instance, if a caterer you already paid goes out of touch when approaching the wedding day, the cover
will provide an alternative.
Dog Bite Insurance An aggressive dog may bite children, the elderly or even postal carriers within your
home compound. Thus, you need this insurance to protect your assets if sued for dog bite.
Portable Electronic Device Insurance This covers portable devices such as cell phones, laptops or
tablets. The cover ensures replacement or repair of such devices if theyre stolen, lost or damaged.
Crime Insurance This covers you or your business against loss or damage as a result of criminal acts
of third parties. Covered risks include loss of funds through embezzlement by employees.
Political Risk Insurance This cover protects your business against loss or damage arising from
politically-related conditions such as civil unrest, coups, riots and revolutions.
Workers Compensation An employer takes this policy on behalf of their employees to cover loss of
income or medical expenses resulting from a work-related injury or sickness.

Disability Overhead Insurance This is a cover against overhead expenses for business owners who
are unable to work.
Aviation Insurance This covers aircraft operations against aviation risks. Specific policies will offer
compensation for damaged aircraft as well as cover third party liabilities such as injured or killed
passengers, damaged crops or property etc.
Crop Insurance If youre a farmer, the cover protects you from losses associated with crop failure as a
result of bad weather, infection or infestation.
Earth Quake Insurance This is a good way to cover your home or property against loss or damage
emanating from an earthquake.
Terrorism Insurance The cover duly compensates you for loss or damage that results from acts of
terrorism such as bombings or mass shootings.
Kidnap and Ransom Insurance This cover comes to the rescue where ransom payment is necessary
to secure the release of someone you love or associated with if theyre kidnapped, detained or hijacked.
Plant Insurance This cover protects industrial equipment, machinery and plant such as tractors and
earth movers against loss or damage.
Professional Liability Insurance This protects professionals such as doctors and architects when their
clients bring negligence claims against them.
Mortgage Insurance The cover comes to the aid of a lender if a homebuyer defaults.