The $4.8 bn surge in India's insurance broking amid sector transformation

Much like our economy, the insurance industry is in the throes of intense transformation. With projected growth rates that are higher than the global average, the recent introduction of 100 per cent foreign direct investment (FDI) and proactive policies of the regulator, the sector is witnessing significant action.

 

The industry is expected to grow by 123 per cent by 2030 contributing to a potential penetration increase of five per cent.

 

Gross written premiums (GWPs) are expected to surge to ₹25 trillion from ₹11.2 trillion in 2024, assuming a few structural shifts. However, for accessible, affordable and comprehensive universal insurance to materialise, considerable efforts are needed to drive up both GWP and intent. 

 

The non-life premium has gone to ₹293,612 crore in the financial year 2024 (FY24) from ₹52,876 crores in FY12.

 

Despite being one of the fastest growing insurance markets in the world, India only has 735 licensed brokers, significantly lower than developed markets. Of these, the top 36 drive close to 85 per cent of total revenue.

 

Only about 38 per cent of the world’s largest insurance brokers operate out here despite over 55 per cent of global insurance players being present in the market.

 

With 100 per cent FDI being permitted for insurance intermediaries in 2020, the partnership with insurers is only set to deepen. 

 

Foreign investment would help brokers in two dimensions. First, the availability of capital would ensure they invest in building research and analytical capabilities. Second, investments from foreign players would allow them to share global know-how and best practices. This would lead to development of advanced risk-analytical models, product insights and superior customer journeys. Brokers would be able to work more deeply with insurers across the entire value chain of insurance servicing, be it pricing, product and claims.

 

Presently, while our GWPs are growing in double digits, coverage measured as a percentage of citizens and businesses with adequate insurance has significantly lagged behind. Urban areas have a disproportionately high presence of distribution infrastructure, despite 65 per cent of the population living in rural regions. Similarly, less than five per cent of small and medium enterprises (SME) have insurance today, highlighting clear gaps in coverage.

 

It must also, however, be noted that a majority of the private equity infusion in insurance broking (between FY17 and FY24) went toward scaling models that focused on traditionally underserved segments, such as mass market, retail, and SME customers. This indicates both growing confidence in the potential of these segments as well the opportunities for brokers to increase presence within them. These being:

 

Embodying trust in insurance: As the conduit between insurance providers and customers — be they institutional or retail — insurance brokers have and will continue to play a definitive role in the overall experience. With greater consolidation, insurance brokers coming into their own can begin asserting their role not as intermediaries but as enablers of superior experiences and offerings for customers. 

 

Deepening awareness: Insurance brokers, by virtue of their reach and role, can play a definitive role in creating awareness for insurance products and laying the right foundation for demand.

 

Integrating technology: As competition in the insurance industry heats up and a growing number of players embrace digital first strategies, the broking industry too will need to rise to the occasion.

 

Representing customer voices: With increasing penetration and geographical expanse, insurance players, who have relied on brokers in the past as well for growing their business, will depend further on these partners both for delivery as well as insights. Those with an ear to the ground will be able to enable insurance providers to stay ahead of the curve.

Spurring innovation: In mature insurance markets, brokers play a strategic role both from a customer and insurer perspective. As they consolidate, insurance brokers will be able to assert their role from an advisory and product innovation standpoint as well.

 

Insurance broking is poised to play an important role and consolidation through private equity investments can propel this further. 

 

The writer is director, Insurance Brokers Association of India.