Motor insurance poised for dramatic transformation
Motor insurance is getting to be digitized, more personalized products are on the anvil and customers can expect a better experience:
The motor insurance industry in India is going through a transformation aided by technologies like AI, big data and IOT, impacting insurance companies as well as customers. While a recent report showed that of the total 180 million registered vehicles on Indian roads, only 60 million are insured as people often do not bother to renew their policies after the initial years, regulatory changes like making third party insurance mandatory are changing the dynamics of the business. The transformation is also facilitated by the increasingly connected world and the ability to collect and process data. It is expected that customer experience is about to improve drastically across sales, service, renewals and claims along with better range of products.
CHANGES IN BIZ ENVIRONMENT
Changes in technology and automobile environment have impacted traditional insurance products. In the last f ew years, motor insurance has become very commoditized and insurance companies are providing special packaging for motor insurance. Price is the most important component when customer buys an insurance - the cheapest policy has higher chance of acceptability.
Anurag Rastogi, member of the Executive Management at HDFC ERGO General Insurance, says the increasing adoption of digital and online technologies are steadily disrupting the Indian insurance market, giving valuable c ursors to traditional business players regarding the future business trends and opening new avenues for growth.
Tarun Mathur, chief business officer at Policy Bazaar.com, affirms that motor insurance in India has gone through lot of changes. “There are 4 regulatory changes in the last 7 months. There are lot of disruptions happening not only inside the companies, but outside the industry which are affecting the motor insurance industry in India. HDFC ERGO, Tata AIG and Digit are some of the favourite private general insurance companies along with the public sector companies among our customers,” says he.
Mathur also says the new age insurance companies have packaged insurance policies in a different manner - they are providing heavy discounts. This revenue model is not sustainable in the long run, as the loss ratio is not supported by the discount, he says adding: “There is no product innovation coming from the new-age companies., especially around he claims side where customes experience the product.”
RISE OF MOTOR COVERS
Motor insurance has always been a rising part of the general insurance industry. It accounts for 40% of the general insurance business in India. Motor insurance is a mandatory product, compared to other insurance products available in the market.
Sanjay Datta, chief of Underwriting & Claims at ICICI Lombard General Insurance, believes pricing of the motor insurance policy is still regulated. “It is the only product which is regulated. The increasing number of vehicles has led to increase in road accidents and hence higher demand for insurance products,” says he.
Devendra Rane, founder & CTO, Coverfox.com, reveals some disturbing facts: “In spite of the mandatory nature of motor insurance, 30% of cars in India are still not insured. For bikes, this percentage is 70%. The agents receive `300 as a commission for selling a bike insurance policy, which is very less compared to other polices and products sold by the agents. So agents are not motivated to sell bike insurance policies.”
Rastogi of HDFC ERGO General Insurance speaks about the changing face of distribution channels for the motor insurance in India: “Online aggregators are growing rapidly due to high density of smart phones clubbed with ease of transactions in finding the right and competitive price and coverage. With this, there will surely be a shift in the landscape of motor insurance distribution channel. Furthermore, with the foray of payment wallets, companies in insurance distribution clubbed with simplified products and processes, the insurance penetration is further set to increase.”
The decision by the insurance regulator to make it mandatory for vehicle owners to buy long-term third-party insurance bundled with own damage cover is seen as a welcome move since policy renewals decline as the age of the vehicle progresses, especially in the case of 2-wheelers. It is also a move intended to highlight the importance of motor insurance. In addition, features like road side assistance and cashless facility have changed the very concept of motor insurance.
Says Rastogi: “The regulator has mandated that the insured (owner/driver) may obtain a personal accident cover for `1.5 million. This widens the scope of coverage for the policyholder, as the maximum cover available earlier was only `200,000. Keeping this in mind, we have launched services like the Overnight Vehicle Repair Service and Self-Inspection App which will drive the growth in business.”
Rane of Coverfox.com says over the years, motor insurance has become very