The last two years, 2021 in particular, have been a watershed period for the life and health insurance sectors because of the pandemic which fostered newer, virtual modes of medical evaluation and policy purchase as also claim settlement.Premiums earned by health insurers saw a spike as an increasing number of Indians queued up to buy or enhance their life and health insurance covers.
While 2022, too, started amid the Omicron wave, hospitalisation rates did not shoot up, which meant that individuals as well as insurers could heave a collective sigh of relief.
But certain changes – for instance, increased awareness around the importance of life and health insurance that the pandemic ushered in – are here to stay. “Customers are showing an enhanced interest in protection products after witnessing the devastation caused by the pandemic,” says Vighnesh Shahane, MD and CEO, Ageas Federal Life Insurance.
Here are the seven key developments that the insurance sector witnessed in 2022.
LIC’s 'sweet' deal for policyholders
The Rs 21,000-crore initial public offering (IPO) of the government-owned behemoth Life Insurance Corporation of India (LIC) was the most talked-about market news for the better part of the year. LIC reserved up to 10 percent of its offer size for its policyholders.
The price band was set at Rs 902 to Rs 949 per equity share, with policyholders being entitled to a discount of Rs 60 per share. Employees and retail investors were offered a relatively lower discount of Rs 45. The response was enthusiastic, and the policyholders’ portion was oversubscribed 6.11 times. So far though, the stock has disappointed. LIC’s stock price closed at Rs 687.05 on December 28.
Life insurers’ focus on guaranteed return policies
The Reserve Bank of India (RBI) started raising repo rate in May 2022, triggering a rise in interest rates in the system as loan and fixed deposit interest rates inched upwards too.
Life insurance companies launched traditional endowment policies, promoted as an opportunity for policyholders to take advantage of higher interest rates.
“Owing to high interest rates, the life insurance sector has witnessed a remarkable surge in traditional business, especially guaranteed products. This has aided in better margins for the life insurance companies as they continue to meet customers’ expectations with their traditional participating and non-participating offerings,” says Kamlesh Rao, MD and CEO, Aditya Birla Sunlife Insurance.
Higher health premiums, newer products
According to industry estimates, health insurance premiums for individuals rose by 8-15 percent this year primarily due to a sharp rise in claims during 2020 and 2021, besides the rising cost of healthcare in the country.
This year also saw more health insurers launch outpatient department (OPD) policies that cover expenses such as doctor’s consultations and pharmacy bills besides hospitalisation costs.
Value-added services was the catchphrase as insurers announced products with features such as a cover of up to Rs 5 crore, planned treatment abroad, elderly support, coverage for pre-existing diseases such as diabetes and so on.
Newer motor insurance riders
The insurance space has seen the insurance regulator go on a reforms overdrive since its chairman Debasish Panda took charge in March 2022. The IRDAI allowed insurers to offer ‘innovative’ motor insurance riders in the form of pay-as-you-use, pay-as-you-drive and motor floater policies.
Several insurers including ICICI Lombard, Kotak General Insurance, Bajaj Allianz and Digit Insurance have launched motor insurance riders this year that will potentially lower the premiums for policyholders based on their usage.
Use-and-file procedure for quicker product launches
Use-and-file norms allow insurance companies to launch new products without prior approval from the regulator.
“The latest regulations such as the use-and-file procedure have brought a significant change of flexibility in the industry. The steps taken by IRDAI are in alignment with its goal of infusing more flexibility and higher governance in the sector. This has helped the insurance industry to mature significantly and continue to focus on increasing penetration,” says Rao.
IRDAI’s move to facilitate ease of doing business
Insurance sector watchdog IRDAI issued a flurry of regulations earlier this month to facilitate ease of business and increase insurance penetration in the country.
“The year 2022 will go down as an action-packed year as far as regulatory interventions are concerned. Some of the key regulations that have had far-reaching impact are use-and-file for products, expanding the number of partnerships for a corporate agency, allowing telematics-based motor insurance and improving access to capital for insurers,” says Shanai Ghosh, Managing Director and CEO, Edelweiss General Insurance.
On the flip side, however, the IRDAI chose not to implement the proposed 20 percent cap on commissions paid to agents. Insurers now are likely to have the freedom to structure commission payouts to agents as per their board-approved policies, provided it does not exceed the total expenses of the management cap.
While linking commission payout to the total expense cap is a positive move, overall commissions paid by the insurance industry remain much higher than what their mutual fund counterparts pay, for instance, to the detriment of policyholders.
Also on the cards next year, after the passage of amendments to the Insurance Act, are composite licences for insurance companies to manage life and general insurance businesses.
Digitalisation the way forward
During Covid-19-hit years, insurers and policyholders had to quickly adapt to the digital mode for policy purchase, medical evaluation, policy servicing and claim settlement. This development, too, is here to stay.
The New Year could see the implementation of e-insurance accounts as well as the rollout of the proposed Bima Sugam platform. This is a regulator and industry-backed digital portal through which policyholders can buy products directly from insurers or through distributors on the platform, if they wish to.“The regulator has urged insurance companies to open e-insurance accounts (eIA) for their customers which would act as the first step towards dematerialisation of insurance policies. (Through) Bima Sugam, customers would be able to purchase life, health and motor policies directly from the platform as well as raise service requests and make claims,” says Shahane.