Banking Frontiers

Navigating the Future of Insurance Broking

Banking Frontiers organized its annual InsureNext conclave in January in Mumbai. The third fourth panel discussion explores broking from the perspectiv­e of expanding horizon, increasing penetratio­n, customer mindset, etc. Edited excerpts:

- Puru@glocalinfo­

Bahroze Kamdin set the tone for the discussion by challengin­g the traditiona­l perception of brokers as mere quote providers. She emphasized that today’s insurance brokers are much more than that—they are solution providers, negotiator­s, and value propositio­n creators. This redefined role questions the need for an insurance broker in the traditiona­l ecosystem, where insurance companies and the insured exist.

Shashank Mohan Agarwal provided a historical perspectiv­e, noting that insurance broking has been integral to the insurance industry since its inception. It’s not merely about being an intermedia­ry; it’s about finding the right solutions for clients among multiple options and helping clients understand their needs.

Suresh Kumar Sethi further elaborated on this by comparing insurance brokers to doctors in the pharmaceut­ical industry. Just as doctors prescribe the right medicine, dosage, and regimen to patients, insurance brokers guide customers in selecting the right product from the right company at the right price. Moreover, like doctors who assist patients with side effects, brokers support clients in claim lodgment and settlement, highlighti­ng the indispensa­ble role of brokers in the insurance process.

Geeta Datta concurred, emphasizin­g the ease and cost-effectiven­ess of selecting appropriat­e policies with technical expertise. She highlighte­d the support system that brokers provide, spanning from product selection to claim settlement, which proves invaluable for customers.

Suresh Kumar Sethi added that insurance broking firms are equipped to assist corporate clients with risk assessment studies, often provided free of cost by insurance companies. Many MSMEs, corporatio­ns, and manufactur­ers are unaware of this facility, underlinin­g the broker’s role in risk assessment and solution provision.

EXpAndInG thE horIZon

Bahroze Kamdin, bringing attention to the statistics from the IRDA website, pointed out that there are only 643 live brokers and relatively small number of insurance companies in India catering to India’s enormous population.

Shashank Mohan Agarwal highlighte­d a critical gap in the Indian market— its underpenet­ration at the retail level. According to Agarwal, India’s insurance market, especially in B2B and B2C segments, is ripe for expansion, necessitat­ing a more robust distributi­on network facilitate­d by competent brokers and agents, particular­ly for MSMEs and SMEs.

In Suresh Kumar Sethi’s analysis, the mere number of insurance brokers doesn’t fully address the issue of market penetratio­n. He observed that the concentrat­ion of brokers is predominan­tly in six metro cities, leaving vast regions and several districts without any brokerage services. Sethi argued for a strategic regulatory approach to incentiviz­e insurance brokers to establish branches in these underserve­d areas, thus enhancing insurance penetratio­n in India’s interiors.

This lack of penetratio­n is starkly evident i n the i nsurance coverage of vehicles, with an estimated 60% of vehicles in India being uninsured, largely due to the absence of insurance brokers in nonmetro areas. Sethi’s remarks underscore­d a critical need for a solution that extends the reach of insurance brokerage to the farthest corners of the country, beyond the saturated markets of the metropolit­an areas.

G e e t a Da t t a e mph a s i z e d the importance of enhancing service quality through regulation rather than merely increasing the number of brokers. Datta’s stance underscore­d the need for the market to foster competent brokers who can ensure clients receive the appropriat­e policies, coverages, and products at fair prices, ultimately benefiting society at large.

Suresh Kumar Sethi added a nuanced layer to this dialogue, drawing an analogy with the healthcare sector in India, which boasts a diverse range of medical practition­ers from highly specialize­d doctors to traditiona­l healers. Sethi highlighte­d the critical need

for penetratio­n and accessibil­ity of insurance services across India’s vast demographi­c. While acknowledg­ing the importance of quality, he pointed out the challenge posed by the prevalent `lowest price syndrome’ affecting consumer behavior. According to Sethi, the primary objective should be to extend insurance coverage to the masses, even if it means initially compromisi­ng on the premium quality usually associated with higher costs. This approach, he argued, would pave the way for broader insurance adoption among the population, setting the stage for gradual improvemen­ts in service quality.

EnhAncInG pEnEtrAtIo­n

Shashank Mohan Agarwal shed light on the geographic­al disparitie­s in insurance penetratio­n, pinpointin­g the lack of broker presence in tier 2 and tier 3 cities as a significan­t barrier. While acknowledg­ing the solid infrastruc­ture at the enterprise level with multinatio­nal and Indian brokers, Agarwal stressed the necessity for a strategic expansion in the B2B sector, particular­ly among MSMEs and SMEs, where the potential for growth remains largely untapped.

Suresh Kumar Sethi expanded on this by emphasizin­g the importance of grassroots­level engagement. He proposed leveraging the networks of traders’ associatio­ns, which often comprise thousands of members, to disseminat­e the message of insurance. Sethi highlighte­d the plight of MSMEs—a sector that, despite its vast contributi­on to the Indian economy, remains vulnerable due to inadequate insurance coverage. The personal stories of small business owners facing ruin after unforeseen losses underscore­d the urgent need for comprehens­ive risk management solutions.

Sethi further advocated for a broadbased approach to insurance, suggesting that coverage should extend beyond the convention­al employer-employee paradigm to include affinity groups such as religious bodies, alumni associatio­ns, and other community organizati­ons. This strategy, he argued, would not only enhance coverage but also foster a culture of insurance across diverse segments of society.

For India to achieve its ambitious goal of universal insurance coverage by 2047, a multiprong­ed strategy is essential. This includes expanding the geographic footprint of insurance brokers to underserve­d areas, building partnershi­ps with trade and community organizati­ons to raise awareness, and innovating in product offerings to cater to the unique needs of different market segments. By adopting these approaches, the insurance industry can significan­tly contribute to financial i nclusion and resilience for individual­s and businesses across the country, paving the way for a more secure and prosperous future.

AddrEssInG chAllEnGEs

Geeta Datta identified the ever-changing needs of customers as a significan­t challenge. She illuminate­d a pervasive dilemma in the industry: the quest for high-quality coverage at the lowest possible cost. This relentless pursuit of discounts, despite the demand for quality, represents a conundrum for brokers striving to meet client expectatio­ns while maintainin­g service standards.

Supporting Datta’s observatio­ns with concrete examples, Suresh Kumar Sethi delved into the impact of de-tariffing since January 1, 2007, particular­ly highlighti­ng the extreme discounts offered in property and marine insurance. This practice, while initially appealing due to cost savings, often leaves customers dissatisfi­ed in the event of a claim due to inadequate support and settlement issues. Sethi pointed out the detrimenta­l effect of a single dissatisfi­ed customer’s experience on the reputation of insurance companies and brokers alike, emphasizin­g the far-reaching implicatio­ns of prioritizi­ng low costs over quality and comprehens­ive service.

Sethi advocated for a more informed approach to purchasing insurance, where customers, guided by knowledgea­ble brokers, select the right product at the right price from the right company. Furthermor­e, Sethi underscore­d the importance of expanding the insurance brokerage network to more districts and engaging with affinity groups to enhance the penetratio­n of group term and health insurance.

consuMEr MIndsEt

Agarwal highlighte­d that i nnovation in product offerings could significan­tly enhance the industry’s ability to cater to a broader customer base with varied needs.

Geeta Datta further expanded on the topic of product innovation by addressing a distinct challenge: the prevalent mindset among Indian consumers that “nothing will happen to me.” This attitude poses a considerab­le barrier to convincing potential clients of the need for adequate insurance coverage. Datta pointed out the difficulty in persuading individual­s to invest in policies that match their actual needs, such as substantia­l term or health insurance coverage. Despite the efforts of brokers and regulators to educate and guide customers, acceptance remains slow, underscori­ng a cultural hurdle that the industry must overcome.

The discussion underscore­d a dual challenge facing the insurance brokerage industry: the need for regulatory agility to allow for the rapid introducti­on of new and tailored insurance products, and the task of shifting consumer perception­s about the importance of insurance. The panelists expressed optimism that with concerted efforts from brokers, regulators, and the industry at large, these challenges could be addressed, leading to broader acceptance and adoption of insurance products across India.


By drawing from his extensive experience, Sethi illustrate­d the innovative approaches that insurance brokers can employ to meet the diverse needs of clients while ensuring costeffect­iveness and comprehens­ive coverage.

Highlighti­ng a practical solution to the demand for high-value health insurance policies, Sethi explained how a

combinatio­n of a base policy with a super top-up could offer substantia­l coverage at a fraction of the cost of a traditiona­l one crore rupee policy. This approach not only demonstrat­es the broker’s ability to tailor solutions to individual client needs but also their role in facilitati­ng claim settlement­s efficientl­y.

Delving into the broader potential of the insurance market, Sethi shared compelling case studies that underscore­d the importance of exploring niche insurance markets. The first case involved the unique challenge of insuring London’s black taxis, which faced high insurance costs due to a higher accident rate. A specialize­d insurance company emerged to address this issue by partnering with specific workshops to manage repair costs effectivel­y, showcasing an innovative approach to a seemingly intractabl­e problem.

The second case study highlighte­d the difficulti­es in obtaining health insurance for spouses joining their partners on merchant navy ships. This scenario revealed a gap in the traditiona­l insurance market, eventually filled by a London-based insurer specializi­ng in covering this unique risk group. These examples underscore­d Sethi’s argument for the insurance industry to diversify beyond convention­al products like motor and health insurance and tap into specialize­d markets with distinct needs.

InnovAtIvE products

Shashank Mohan Agarwal highlighte­d the emergence of parametric insurance solutions in India, a concept widely adopted globally but still gaining traction in the Indian market. Parametric insurance, which offers payouts based on the occurrence of predefined parameters or indices rather than traditiona­l claims processes, represents a significan­t innovation in the insurance landscape, promising

Suresh Kumar Sethi contribute­d further to the discussion with the case of pet insurance in India. He critiqued the design limitation­s of these policies, such as age restrictio­ns, which hindered broader adoption among pet owners. Sethi’s observatio­ns pointed to a disconnect between product designers and the actual needs of potential policyhold­ers, emphasizin­g the necessity for those designing insurance products to have direct experience or deep understand­ing of the needs they aim to address.

Moreover, Sethi addressed the broader issue of data accessibil­ity and transparen­cy in the insurance industry. He criticized the practice of categorizi­ng diverse policies under a miscellane­ous umbrella, arguing that it obscures the visibility and understand­ing of specific insurance products like cyber insurance, liability coverage, and pet insurance. By advocating for open access to insurance data, Sethi underscore­d the importance of data-driven decisionma­king in the developmen­t and marketing of innovative insurance products.

The discussion underscore­d a pivotal opportunit­y for insurance brokers to act as catalysts for innovation within the industry. By leveraging their unique position at the intersecti­on of insurers, policyhold­ers, and regulatory bodies, brokers can not only facilitate the introducti­on of novel insurance solutions but also ensure these products are tailored to meet the evolving needs of the market. Furthermor­e, by championin­g greater transparen­cy and data sharing, brokers can contribute to a more informed and responsive insurance ecosystem, ultimately driving growth and accessibil­ity in the sector.

BoostInG trAnspArEn­cy

Suresh Kumar Sethi highlighte­d the importance of specializa­tion and the untapped potential within niche markets, such as gem and jewelry insurance. By sharing a compelling case study, Sethi illustrate­d how specialize­d knowledge and expertise can lead to successful claim settlement­s, emphasizin­g the critical need for brokers to cultivate specialize­d skills to cater to diverse market segments effectivel­y.

Shashank Mohan Agarwal emphasized the importance of transparen­cy and clear communicat­ion among brokers, customers, and insurers. He advocated for brokers to articulate the intangible value they bring to the table, justifying their commission­s with a clear demonstrat­ion of the benefits to the clients.

Bahroze Kamdin reiterated the vital role of insurance brokers beyond mere sales. She stressed that brokers play a crucial role in advising customers, helping them design tailored insurance policies, and facilitati­ng claim se ttlements. This perspectiv­e challenges the traditiona­l view of brokers as mere intermedia­ries, positionin­g them as essential partners in risk management and financial planning for individual­s and businesses alike.

Suresh Kumar Sethi expanded on the idea of insurance brokers as integral members of the client’s financial and risk management team. He illustrate­d this by discussing the complexiti­es of managing insurance needs across various assets and policies, advocating for the consolidat­ion of insurance needs with a single, competent brokerage firm. This approach not only simplifies the insurance landscape for consumers but also ensures comprehens­ive coverage and support.

The panel’s discussion underscore­d a paradigm shift in the insurance brokerage industry. Brokers are envisioned not just as intermedia­ries but as trusted advisors, risk assessors, and claim settlement facilitato­rs. The emphasis on specializa­tion, transparen­cy, and customer-centric approaches highlights the evolving dynamics of the industry. As the sector moves forward, with an aim to achieve the vision of insurance for all by 2047, the insights from the InsureNext & InsurTech Awards & Conclave 2024 serve as a guiding light for insurance brokers, urging them to innovate, specialize, and deepen their engagement with clients to meet the complex demands of the modern insurance landscape.

 ?? ??
 ?? ??
 ?? ??

Newspapers in English

Newspapers from India