Bima Sugam likely to reduce dependence on intermediaries for insurers

Electronic insurance marketplace Bima Sugam is expected to reduce the dependence of insurance companies on intermediaries and promote the sale of products through direct digital means, according to industry leaders. The Insurance Regulatory and Development Authority of India (Irdai) approved Bima Sugam during its board meeting on March 19.

Bima Sugam, part of Irdai’s Bima Trinity - Bima Vistaar, Bima Vahak, and Bima Sugam - is a platform that will list insurance products from life, health, general, motor, travel, property, among other insurance categories, providing a comprehensive one-stop shop for insurance needs.

“Insurance companies stand to benefit from the reduction or elimination of intermediaries such as brokers and agents, instead favoring direct digital transactions. Insurance intermediaries may pivot towards advisory-based insurance products that require personalised guidance and cannot be easily purchased online,” said Anuj Parekh - Co-Founder and CEO, Bharatsure.

According to Irdai’s annual report for FY23, the online sales channel of life insurers contributed to 0.84 per cent of the individual new business premium (NBP). The share of direct sales in life insurers’ business was 7.81 per cent in Individual NBP and 84.55 per cent in group business.

For the general insurers, the online direct business was 1 per cent of the premium and the entire direct channel accounted for 25 per cent of the total new premium in FY23. In the case of health insurance, direct sales amounted to nearly 30 per cent of the total new business in the year.

The digital platform offers consumers the choice to purchase their policies either directly or through intermediaries. According to Shashi Kant Dahuja, Chief Underwriting Officer, Shriram General Insurance, “If the customers choose to buy policy through the platform directly by avoiding intermediaries, it will help them to save money… There is also an option for changing agents if the consumer is dissatisfied with the service provided by his existing agent.”

Irdai Chairman Debasish Panda described Bima Sugam as a ‘UPI-like moment in insurance’ – a one-stop solution for all stakeholders including - customers, insurers, intermediaries, and agents to promote transparency and efficiency and boost insurance penetration in the country to achieve the vision of “Insurance for all by 2047”.

Experts anticipate a transformation in the retail insurance landscape on account of Bima Sugam where people have the opportunity to select a product suitable for them from a slew of options, with the intermediaries acting as advisors in selecting appropriate products.

“Customers would definitely need an advisor to select the right product since health and life are a longer-term products and needs to be selected carefully looking into the future,” noted Sumit Bohra, President of the Insurance Brokers Association of India (Ibai).

The distribution of shareholding in this ‘not for profit company’ registered under the Companies Act, 2013 amongst the life, general and health insurance companies with no single entity holding a majority stake is also expected to reduce the cost of insurance for customers.

“The widespread listing of insurance companies could also lead to pricing pressures, potentially driving down the cost of insurance,” said Parekh of Bharatsure.

The platform which is unanimously believed to boost insurance penetration in India is considered to create challenges for the insurtech industry in terms of integration with the system and partnership with insurance companies along with enhanced competition in the retail insurance space.

“Bima Sugam empowers InsurTech players to innovate tailored solutions, ultimately driving greater accessibility, transparency, and customer-centricity in the industry However, integrating with this system and partnering with insurers on the platform may pose initial challenges in terms of standard protocols and alignment of priorities,” noted Mayank Gupta, Co-Founder of Zopper.

The insurtech industry believes Bima Sugam will drive innovations as the segment seeks new growth opportunities.

Gupta notes that these challenges can be addressed through strategic planning and investment with a long-term outlook. The insurance companies remain optimistic about the digital platform.

Sharad Mathur, MD & CEO, Universal Sompo General Insurance observed that it was the choice for customers to access all types of policies on a single platform from purchase to claim processing that distinguishes Bima Sugam from the currently existing online options.

Bima Sugam not only helps customers buy insurance products but also in servicing insurance policies, settlement of claims, grievance redress, and other related matters.

Alok Rungta, Deputy CEO & CFO Future Generali India Life Insurance, said, “Since Bima Sugam is not just a platform for selling insurance products but also servicing them, it will generate a level of healthy competition among insurance providers across life and non-life segments since consumers will be comparing us across all parameters. Since it is not just insurers but also intermediaries, agents and consumers who are on the platform, it will encourage a high level of transparency and collaboration.”

LIKELY BENEFITS

Bima Sugam is a one-stop solution for customers, firms, and distributors

It may transform the retail insurance segment

Insurance intermediaries likely to move to advisory-based products