India's emergence as a global economic powerhouse is reminiscent of the rise previously seen in China. Now positioned as the world's fifth-largest economy, India offers a rich landscape for investment, especially appealing to Nordic countries keen on expanding their international presence.
The growing Indian economy, coupled with an upsurge in the insurance market, presents valuable opportunities. This growth is primarily driven by an increase in insurance penetration in the private sector, creating a supportive environment for Nordic businesses to prosper.
According to Deepthy Prakash, DVP – International Business Group, at ICICI Lombard, “India is on the cusp of economic growth. India has set itself a very ambitious growth target of becoming a developed economy with a GDP of 30 trillion USD by 2047. Strong economic growth, innovation and regulatory support is driving the growth of the insurance market in India with the general insurance industry delivering a year-on-year Gross Domestic Premium Income (GDPI) growth of 12.8% for the FY2024. GDPI growth for ICICI Lombard stood at 17.8% at INR 247.76 bn.”
“The strong infrastructure push from the Government of India to build roads, railways, airports, and ports has resulted in the rapid demand for construction policies which was the fastest growing sector in commercial lines at 26% excluding health insurance in the last financial year. With more and more global multinationals investing in India due to the favourable investment environment, the Indian insurance sector is poised to be one of the fastest growing markets in the world.”
Deepthy also notes significant growth in various industries, “We are seeing huge demand in sectors like global data processing centres, renewable energy, semiconductor manufacturing, defence, shipping, life sciences and automobile manufacturing. There is a growing demand for insurance cover which is more in line with global coverage enjoyed by these large multinational corporations in their home countries particularly on the P&C side.”
Deepthy Prakash adds, “After the pandemic, the health & personal accident insurance sector has also shown considerable growth with the increased awareness on personal well-being and wellness. With the Indian airspace becoming one of the busiest in the world, we are seeing rapid growth in the demand for both personal accident and travel insurance.”
Whilst witnessing this substantial growth and continuous development, some of the Indian insurance sector’s characteristics pose unique challenges to insurers while implementing global programmes. Non-admitted insurance not being allowed and regulatory requirements affecting the coverage, pricing, payment terms and reinsurance cessions abroad, call for special attention from all the stakeholders involved.
The growing Indian economy, coupled with an upsurge in the insurance market, presents valuable opportunities.
The regulation around property insurance is particularly strict. The Insurance Information Bureau (IIB) sets guideline rates that, although not mandatory, are universally followed due to mutual market agreement concluded between the local insurers although there are exceptions for mega risks, i.e., cases in which a single location's sum insured exceeds INR 25,000,000,000 (approximately 300 million USD).
With the new property de-tariff guidelines effective April 1, 2024 and the ease in the product filing guidelines, the Indian fire market is expected to evolve with new wordings and rating structures customised to suit client requirements.
Historically, up to 2006, India maintained a tariff market which was de-tariffed in 2007 to allow insurers greater flexibility and competition in pricing risks. This shift led to significant reductions in premiums and contributed to instability following increased losses from natural catastrophes. By 2019, it became necessary to reintroduce tariffs for certain types of occupancies and by April 2020, the group of these originally ten occupancies were increased to 300 and applied to all property policies, including those part of global programmes.
Based on over 15 years of experience in the Indian insurance market, Deepthy Prakash states that, “Global programmes work well as they usually have broader coverage as compared to locally administered policies across product lines. However, the challenge arises when it comes to high deductibles from the master programme (usually in dollar terms) which is to be applied in the local policy. Indian clients are always concerned that this would result in most small value claims being denied.”
“Local programs are always issued on full sum insured basis. However, global policies follow a loss limit basis which is another concern voiced by insureds. India is a cash before cover country, hence having the final terms bound well before risk inception is necessary to avoid any gap in cover. Premium collection well in time is a very important aspect of delivering a successful global programme. Occasionally, lack of clear communication between the local clients and the global parent may result in non-acceptance of terms locally and hence non-payment”, Deepthy highlights.
Implementing successful global insurance programmes in India demands careful planning and execution. It is vital to ensure active participation from local clients, as their engagement is crucial for the seamless integration of such programmes. Moreover, effective communication among all stakeholders is necessary to ensure the smooth operation of local insurance policies in India. Adhering to the strict regulations set forth by IRDAI, such as the limitations on using foreign loss adjusters unless they have local representation and registration, is also a significant aspect of regulatory navigation.
Looking ahead, it is crucial to maintain ongoing conversations with ICICI Lombard to fully grasp the nuances of possible de-tariffication and its broader impact on the market. Furthermore, delving into master coverage solutions with insights from experienced property underwriters will enhance our understanding and may unveil new opportunities for Nordic companies in India.
“De-tariffication should be seen as an opportunity for the Indian market to evolve into a mature insurance market. We do foresee initial challenges involving pricing pressure, with every company trying to compete and garner maximum market share from competition. However, since the reinsurance market continues to be a hard market for property, we expect the rates to stabilise soon after the initial disruption of the first quarter”, Deepthy notes.
“The change in regulations also gives Indian insurers an opportunity to develop market appropriate wordings as per the risk profile of the customer. This will also lead to the evolution of risk management services offered by insurers like ICICI Lombard as clients will be soon rewarded for a positive risk profile “, she adds.
For Nordic investors, the evolving Indian market along with its complex regulatory framework, presents both substantial opportunities and notable challenges. By tapping into detailed insights about regulatory shifts, fostering strong relationships with local stakeholders and smoothly navigating the multifaceted insurance landscape, Nordic companies are well-positioned to thrive in India’s dynamic environment.
To succeed in the Indian market, it is important to have reliable insurance partners when starting business operations in the country. Deepthy emphasises that, “Using a credible insurance carrier and broker is of paramount importance to implementing a successful global programme. There have been past instances of erroneous/non-complaint policies being issued which have resulted in disputes at the time of claims.”
We would also like to take this opportunity to warmly congratulate ICICI Lombard on their recent achievement at Axco’s Global Insurance Awards, where they were honoured as the Regional Specialist in Global Programmes of the Year 2024.