India’s auto insurance sector – A growth story

Animesh Das, Senior Director – Motor Underwriting, ACKO General Insurance

With a flourishing automobile industry registering significant growth, the Indian motor insurance market has emerged as one of the fastest- growing sectors. A steadily growing economy, rising consumers’ disposable incomes and increasing preference for personal mobility have propelled India to be the fourth largest car sales market globally. Multiple government policies like the FAME-II, PLI schemes for semiconductor manufacturing and advanced chemistry cells have provided further impetus to the automobile sector which in turn is boosting the insurance market. This has led to a rise in the motor insurance industry in India, which accounted for 34.1 per cent of the non- life insurance premiums earned.

The rise of insurtechs

The recent boom in insurtechs is rapidly transforming the insurance landscape in both fundamental and scalar ways. Advanced technology has now become an integral part of the industry paving the way for possibilities of new methods of service provision, better risk identification, and mitigation measures through efficient collection and analysis of data.

Along with the rapid growth in digitisation, partnerships between automobile companies and financial service providers have enabled better insurance penetration in the ecosystem.

The rapid adoption of digital tools among insurers to deliver seamless customer experience solutions has been key to the growth of the auto insurance industry. Insurers are now more aware of their demographics and how to make their services widely accessible through Insurtech. Insurance companies are also partnering with financial services to implement technologies like AI and blockchain into their operations.

Consumers today are more informed and pickier about their preferences and seek customised offers and personalised communications to address their complicated needs. This has led to insurance companies leveraging data and technology extensively. The use of Artificial Intelligence (AI), Internet of Things (IoT), Machine Learning and Telematics has risen exponentially allowing the companies to digitally transform their businesses and adopt to the changes in customer behaviour.

Besides helping to create unique experiences for the consumers AI also enables insurers to collect and analyse data faster and accurately while eliminating the human element. Machine learning is revolutionising processing and accessing files, complaints as well as systematise and streamline complex processes.

The constant shift towards a digital world has enhanced consumers’ expectations. With facilities to shop for policies online, read reviews and compare policies of different insurers, they expect seamless and more personalised experiences. This has led to the emergence of AI chatbots. Equipped with dynamic question and answering mechanisms, chatbots are now steadily establishing themselves as an innovative cost effective solution to address the growing needs of customers as well as adding value to their experience.

As against legacy processes, lengthy paperwork and complex affairs, chatbots serving as a listening channel, enable efficient and expedited processing of claims

UPI transactions and policies like Bima Sugam, a one-stop shop for policy sales, renewals, and claims settlements, are set to be the game-changer in the insurance industry. Ventures like this offer operational excellence via a centralised Original Equipment Manufacturer (OEM) and Original Equipment Supplier (OES).

The Government envisions digitisation as the future of the insurance sector and endeavours to strike a balance between orderly development of the sector and protection
of the interests of policyholders, and at the same time facilitating innovation. Towards this end, the IRDAI introduced the regulatory sandbox aimed at creating a safe and conducive environment to experiment with innovative approaches.

The Insurance Regulatory and Development Authority of India’s Regulatory SandboX envisages using innovative ideas to foster growth and increase the pace of most innovative companies, in a way that provides flexibility in dealing with regulatory requirements and at the same time focussing on policyholder protection.

Robust policies for the win

Apart from the Motor Vehicle Act of 1988 that states insurance of a motor vehicle covering third-party risk is mandatory by law in India, the nation is now ditching orthodoX methods and looking toward newer ways of insurance. Bima Sugam is a classic example of an insurance revolution, allowing policyholders and customers to choose from various products, businesses, and payment options on this platform. This will not only democratise the insurance space but also make it more efficient and future ready.

Hailed as the game changer for the insurance industry, Bima Sugam will disrupt the digital distribution of insurance in India. The one stop shop Bima Sugam will afford the insurance holders to have their own E-Bima accounts where all their respective insurances will be displayed be it health, life, motor, general fire etc. The policyholders can access them whenever or wherever they want to. The policy holders will also be able to access and monitor all their policies and make premium payments. The platform will also be of great service to IRDAI in monitoring and preventing fraudulent practices.

Along with the revolutionary Bima Sugam, usage-based insurance services like pay as you drive and pay how you drive, have created more ease and access to insurance services and contributed to widespread awareness about auto insurance.

Pay As You Drive is a customisable insurance policy which provides the mandatory third-party liability but is based on the distance travelled by the vehicle. Under this policy, the premium depends upon the number of kilometres the insured car is driven.

Pay How You Drive is a telematics based car insurance plan for which the premium is calculated based on the driving behaviour. The better and safer the driver of the car is, the lesser is the premium.

India – the sweet spot

India has emerged as a sweet spot for investments in the recent times. The Finance Ministry announced to infuse Rs. 3,000 crores (US$ 413.13 million) into state-owned general insurance companies to improve the overall financial health of companies.

This has been possible because of three primary reasons:

High demand– Growing interest in insurance among people, innovative products and distribution channels are aiding growth. The gross first year premium of life insurers increased by 12.93 per cent in 2021-22.

Attractive opportunities– While insurance reach is still low in India, the overall insurance penetration (premiums as % of GDP) was 4.2% in FY21, providing a huge underserved market. Insurance Regulatory and Development Authority of India (IRDAI) allowed insurers to invest debt securities of Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs); this is expected to provide more investment options for the country’s emerging start-up ecosystem. And with the New Chairman coming in to increase penetration, he has introduced new policies.

Policy support– As of April 2022, the Indian Government intends to raise Rs. 50,000 crore (US$ 6.62 billion) through the LIC IPO. In September 2021, the Union Cabinet approved an investment of Rs. 6,000 crore (US$ 804.71 million) into entities, offering export insurance cover to facilitate additional exports worth Rs. 5.6 lakh crore (US$ 75.11 billion) over the next five years. In August 2021, the Parliament passed the General Insurance Business (Nationalisation) Amendment Bill.


For almost a decade, India faced the challenges of fighting low financial literacy, however, with rapid digitisation and acceptance of newer technologies, insurers are finding ways to reach out to the masses and make insurance an easier experience for them. Additionally, the pandemic has rapidly shifted insurance to online modules, and with this, insurance companies are now working on a seamless end to end buying journey.

With rising consumer awareness comes context-sensitive and coherently structured insurance modules that make it more appealing and comfortable to new-age customers.

Also Read | Digitisation enables a better future for the insurance industry

For insurers, there is a great opportunity to educate consumers about the benefits of motor insurance and its vital importance to reduce the number of uninsured vehicles on the road. Constant customer education will bring clarity in expectations from the consumers and eventually will lead to building hassle-free experiences and relevant products.

The road ahead

Strong growth in the automotive industry over the next decade is expected to boost the motor insurance market. Post-covid, the rising demand for personal mobility space, is leading to a shift in vehicle ownership patterns and may create an opportunity for motor insurers. The need of the hour would be to ensure literacy and awareness among consumers along with the identification of key demographics and making the most of the conducive Government policies. Also, increased partnerships between financial institutions and motor companies will ensure hassle-free experiences. While the sector has been rapidly evolving with time, further digitisation will lead to product innovation to keep up with changing times.

While the growth of Indian motor insurance sector was negatively impacted by the Covid-19 pandemic, with the sales of vehicles surging post- pandemic and the ease of accessing insurance, the industry is set to flourish on a large scale. The industry was once fragmented in parts, but with various players coming to the fore and offering customised policies the market will not only expand, but also become one of the key players in
turning the economy around in FY23-24.

Views expressed by Animesh Das, Senior Director – Motor Underwriting, ACKO General Insurance.

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