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Innovations in the Indian Insurance Industry

India presents a lucrative insurance market with tremendous growth potential. By 2020, India's insurance industry is forecast to reach USD 280 billion1. Laws and regulations for this sector are dynamic to achieve this and to address the evolving needs.

A closely regulated sector, insurance business in India can only be conducted by an Indian insurance company or a reinsurance company registered with the IRDAI (Insurance Regulatory and Development Authority). The present tone in the Indian economy is to welcome foreign investment while protecting Indian businesses. The Union Budget announced in July 2019 to open FDI (Foreign direct investment) to 100% for insurance intermediaries, including insurance agents, brokers from the current 49%2. Presently, it is estimated 55% of Indians buy insurance through agents.3 As on June, 2018, the Indian insurance brokers market consisted of 368 licensed direct brokers, 60 licensed composite brokers and 5 licensed reinsurance brokers4. The FDI relaxation will have a huge impact and has a great potential for foreign players to participate in this sector. Public sector insurance companies encompass the majority of the market share. The private sector has seen a considerable rise, for instance, in non-life the private insurance market rose from 13.12% in FY03 to 54.32% in December 2018.

As a background, the IRDAI in 2011 issued the IRDA (Issuance of Capital by Life Insurance Companies) Regulations, 20115 and the IRDAI (Issuance of Capital by General Insurance Companies) Regulations, 2013 in relation to raising capital through public offerings6. Similar notifications have been issued such as the IRDAI (Issuance of Capital by Indian Insurance Companies Transacting Life Insurance Business) Regulation, 2015 and IRDAI (Issuance of Capital by Indian Insurance Companies Transacting other than Life Insurance Business) Regulation, 2015. These, along with other laws prescribe conditions applicable to Indian insurance companies for public offering7.

The regulatory framework has been consolidated by the Insurance Laws (Amendment) Act, 2015 ("ILA")8 steering change to the reinsurance market. Liberalising aspects of the laws has facilitated the entry of Foreign Reinsurance Branches and Lloyd's India Branch, Lloyd's Syndicates & Service Companies and insurance offices in IFSC (SEZ). The Reinsurance Expert Committee9 reviewed the IRDAI (General Insurance-Reinsurance) Regulations, 2016, the IRDAI (Life Insurance) Regulations, 2013, the IRDAI (Registration and Operations of Branch Offices of Foreign Reinsurers other than Lloyd's) Regulations, 2015 and the IRDAI (Lloyd's India) Regulations, 2016 resulting in a significant rise in capital insurance companies in India in 2017. In August, 2018, LIC India was approved to acquire controlling stake in IDBI through preferential allotment and open offer and in early 2019, online insurance technology platform, Turtlemint raised USD 25 million in funding10 and other insurance investment has also seen a significant increase11.

Effective from 1st January, 2019, the IRDAI's (Re-insurance) Regulations, 2018 ("RI Regulations") were introduced whereby new procedural requirements are stipulated for reinsurance arrangements12 and for the order of preference of reinsurance including a requirement to use the Indian domestic capacity before reinsurance placements with cross-border reinsurers13.

The RI Regulations details in the definition of insurance segment14 specific activities such as oil & energy, marine cargo, marine hull, and aviation to name a few15. It appears to take a more flexible approach allowing Indian insurers to formulate a suitable insurance segment-wise retention policy16. The need to tailor to the specific needs of a re-insurance structure is also witnessed by the provision introduced in the RI Regulations requiring Indian insurers to submit alternative risk transfer proposals to the IRDAI, for which transfers may be granted17. The new RI Regulations modifies reinsurance arrangements to provide a unified and simplified structure that would more suitably apply to both life and non-life sectors.

Additional developments in 2019 are the introduction of norms for communications between policyholders and insurers18, new third party liability motor premium rates have been notified19, draft guidelines for introduction of the 'Standard Mediclaim Policy'20, draft guidelines for exclusions prevalent in health insurance21, Conflict of Interest Guidelines22, Minimum Information Regulations23, and most interestingly the draft on Product Structures of Fire & Allied Perils Product24, a proposal of the regulatory sandbox framework25 and the amendment to the brokers regulation.26

Currently, the wordings, terms and conditions in respect of the basic policy for fire and allied perils for all categories of risks are driven by the erstwhile All India Fire Tariff, 200127. There is a view to restrict the structures for fire and allied perils. On 19th May, 2017, observing the recent catastrophic events of massive floods and severe droughts the IRDAI noted that economic losses are much higher than insured losses thereby leaving a need to increase the penetration of fire and allied perils insurance, in particular for dwellings, offices, hotels, shops etc. as well as for micro, small and medium enterprises28. The IRDAI has published standard fire and special perils policies on their website which covers insurance for accidental, man-made and environmental disasters29. On 20th May, 2019 the IRDAI issued an Exposure Draft on Revisiting the product structure for Dwellings, Offices, Hotels, Shops etc. and Micro, Small and Medium Enterprises against Fire and allied perils30 addressing redesign and development of product design, proposed policy wordings, simplified terms and conditions in plain language and the like having regard the demography of the insured.

Another significant development is also enhancing technology in the insurance sector. This has been heavily deliberated amongst stakeholders for the integration of technology, enhancing big data for distribution channels, marketing strategy and customer experience. Technology innovation in relation to InsurTech to name a few include digital platforms, Internet of Things (IoT), Big Data Comparators, Robo Adviser, Machine Learning, Artificial Intelligence, Blockchain, P2P, Usage based insurance and so on31.

To adapt to the dynamic nature of technology, the IRDAI has mandated digitising insurance sales and purchase policies for which every insurer is to issue electronic insurance policies32. On 31st July, 2018, the IRDAI uploaded the Report on InsurTech – Working Group Findings & Recommendations. The Report considered recommendations to the regulatory and supervisory framework for InsurTech, in relation to "Risk Assessment, Risk Improvement, Product Design and Product Pricing"33. In February, 2019, the IRDA issued a Regulatory Sandbox in the Insurance Sector Report34 and in May 2019 it issued the Exposure Draft on IRDAI (Regulatory Sandbox) Regulations"35 draft regulations. This permits technology-based insurance companies such as InsurTech and FinTech companies to implement technology driven innovation. To facilitate the mechanics of the new policies, in 2019 the Reserve Bank of India's draft framework and the Securities Exchange Board of India's framework were issued for innovation in sandbox enabling and promoting start-up companies to develop innovative products and processes.36

India's legislation in relation to data collection, storage and management is general in still developing. The Report on InsurTech – Working Group Findings & Recommendations to some extent addresses data capture mentioning the challenges and how data should not be used other than for the purpose for which it is intended and should not be shared without the policyholders' consent."37 The Information Technology Act, 2000 along with the Information Technology (Reasonable security practices and procedures and sensitive personal data or information) Rules, 2011 are the primary legislations currently governing data. Underway, is the Personal Data Protection Bill, 2018 ("PDP Bill") addressing data and personal sensitive data issues more specifically. This awaits parliamentary approval. Several companies have started taking precautions towards compliance with the new law in anticipation of the PDP Bill coming into effect since there are stringent provisions proposed in relation to data collection, storage and usage for data, particularly sensitive personal data38. This would have a great bearing on technology driven insurance companies in respect of analytics and the use of sensitive personal data such as financial, health and genetic data in order to provide optimum insurance options to policyholders.

The IRDAI issued the IRDAI (Insurance Brokers) Regulations 2018 on 21st January, 2019 relaxing restrictions previously placed on subsidiary companies. The IRDAI can now assess the interests of policyholders. A further liberalisation for insurance brokers was made by the RBI on 11th April, 201939 in respect of reinsurance and composite insurance brokers registered with IRDA who may now open and maintain non-interest bearing foreign currency accounts with authorised dealer banks in India for transactions in the ordinary course of their business.

Further initiatives include the introduction of the world's largest health insurance schemes which was introduced in September, 2018 by way of the Ayushman Bharat healthcare programme for the economically underprivileged population in rural and urban areas who would be identified on the basis of data from the Socio-Economic Caste Census (SECC) 201140. This scheme will likely significantly promote growth of health insurance in India41.

In the past year, the insurance sector in India has seen several innovative steps with an aim of greater efficiency. Liberalising the areas for brokers and agents, seem to indicate that India's insurance industry is piecing itself to form deeper penetrating framework while presenting new and greater opportunities to foreign players.


  1. <https://www.ibef.org/industry/insurance-sector-india.aspx> Accessed on 25 07 2019
  2. <https://www.indiabudget.gov.in/bh.php> Accessed on 25 07 2019
  3. <https://www.livemint.com/insurance/news/55-indians-still-buy-insurance-via-agents-1560242570537.html> Accessed on 24th July, 2019
  4. <https://www.irdai.gov.in/ADMINCMS/cms/LayoutPages_Print.aspx?page=PageNo2120> Accessed on 08 08 19
  5. Section 5 of the IRDA (Issuance of Capital by Life Insurance Companies) Regulations, 2011
  6. Section 5 of the IRDA (Issuance of Capital by General Insurance Companies) Regulations, 2013
  7. Companies Act, 2013, as amended and the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, as amended.
  8. The Act states that it is "An Act further to amend the Insurance Act, 1938 and the General Insurance Business (Nationalisation) Act, 1972 and to amend the Insurance Regulatory and Development Authority Act, 1999."
  9. Page 7 of the Report of the Reinsurance Expert Committee 2017
  10. https://www.livemint.com/Industry/arrmpZmNjoc6X6D3TD5jqN/Insurance-startup-Turtlemint-raises-25-million-from-Sequoia.html> Accessed 1st August, 2019
  11. <https://www.business-standard.com/article/companies/star-health-gets-in-principle-approval-from-irdai-for-proposed-stake-sale-119032600665_1.html> Accessed 1st August, 2019
  12. Section 3(3) of the IRDAI (Re-insurance) Regulations, 2019 dated 30th November, 2018
  13. Section 5 of the IRDAI (Re-insurance) Regulations, 2019 dated 30th November, 2018
  14. Previous definition under 2(l) of The IRDAI (General Insurance- Reinsurance) Regulations, 2016 included "Insurance segments' for the purpose of these regulations, shall mean the following: i) Fire; ii) Marine; iii) Health(including Personal Accident & Travel); iv) Motor; v) Miscellaneous; vi) Any other segment (under miscellaneous segment) which contributes more than 10% of the Gross Written Premium of the Miscellaneous segment of business; vii) Any other segment as may be specified by the Authority from time to time".
  15. Section (2)(16) of IRDAI (Re-insurance) Regulations, 2018 dated 30th November, 2018 provides an "Insurance Segment', for the purpose of these regulations, means and includes the following: A. Fire (Other than Oil & Energy); B. Marine Hull; C. Marine Cargo; D. Engineering; E. Aviation; F. Motor; G. Health (including Personal Accident & Travel), other than policies issued by insurers transacting Life Insurance business; H. Crop; I. Trade Credit; J. Oil & Energy; K. Liability; L. Miscellaneous; M. Life (including health insurance policies issued by Life Insurers); N. Any other segment (under Miscellaneous segment) which contributes more than ten percent of the Gross Written Premium of the Miscellaneous segment; O. Any other segment as may be notified by the Authority from time to time"
  16. 2(A)(b) of the IRDAI (Re-insurance) Regulations, 2019 dated 30th November, 2018
  17. Section 8 of the IRDAI (Re-insurance) Regulations, 2019 dated 30th November, 2018
  18. Circular on "Information to the insurance policyholders/ claimants about various insurance policy services" of 10th April 2019
  19. IRDAI's order on "Premium Rates for Motor Third Party Liability Insurance Cover for the Financial year 2019-20 effective from 16th June, 2019" of 4th June 2019
  20. IRDAI's "Draft Guidelines on Standardization of Individual Health Product" of 19th February 2019
  21. "Exposure Draft on Guidelines on Standardization of Exclusions in Health Insurance Contracts and Modification Guidelines on Product Filing in Health Insurance" of 16th May 2019
  22. "Exposure Draft on Insurance Regulatory and Development Authority of India (Conflict of Interest) Guidelines" of 8th March 2019
  23. "Exposure Draft on IRDAI (Minimum Information for Inspection or Investigation) Regulations" of 17th May 2019
  24. IRDAI's "Exposure Draft on Revisiting the product structure for Dwellings, Offices, Hotels, Shops etc and Micro, Small and Medium Enterprises against Fire and allied perils" of 20th May 2019
  25. IRDAI's "Exposure draft on IRDAI (Regulatory Sandbox) Regulations" of 18th May 2019
  26. IRDAI (Insurance Brokers) (First Amendment) Regulations 2018
  27. https://www.irdai.gov.in/ADMINCMS/cms/frmGeneral_Layout.aspx?page=PageNo3814 Accessed 08 08 19
  28. https://www.irdai.gov.in/ADMINCMS/cms/frmOrders_Layout.aspx?page=PageNo3158&flag=1 Accessed 08 08 19
  29. These include fire, lightning, explosion/implosion, aircraft damage, riot, strike and malicious damage, terrorism damage, storm, cyclone, typhoon, tempest, hurricane, tornado, flood and inundation, impact damage, subsidence and landslide including rock slides, bursting and/or overflowing of water tanks, apparatus and pipes, missile testing operations, leakage from automatic sprinkler installation and bush fire <https://www.irdai.gov.in/ADMINCMS/cms/Uploadedfiles/54.SFSP%20-%20Policy%20Wording.pdf and https://www.irdai.gov.in/ADMINCMS/cms/Uploadedfiles/126.%20Standard%20Fire%20and%20Special%20Perils.pdf> Accessed on 07 08 19
  30. "Exposure Draft on Revisiting the product structure for Dwellings, Offices, Hotels, Shops etc and Micro, Small and Medium Enterprises against Fire and allied perils"-dated 20th May, 2019 https://www.irdai.gov.in/ADMINCMS/cms/frmGeneral_Layout.aspx?page=PageNo3814- Accessed 08 08 19
  31. Page 1 of Report on InsurTech- Working Group Findings & Recommendations dated 31st July, 2018
  32. Insurance Regulatory and Development Authority of India (Issuance of e-Insurance Policies) Regulations, 2016 dated 13th June, 2016
  33. Page 32 of Report on InsurTech- Working Group Findings & Recommendations dated 31st July, 2018
  34. IRDAI's "Report of the Committee on Regulatory Sandbox in Insurance Sector in India" on 5th February 2019
  35. IRDAI's "Exposure draft on IRDAI (Regulatory Sandbox) Regulations" of 18th May 2019
  36. SEBI/MRD/CSC/CIR/P/2019/64 - "Frame work for Innovation Sandbox" dated 20th May, 2019 and RBI's draft Enabling Framework for Regulatory dated 18th April, 2019 <https://www.rbi.org.in/scripts/PublicationReportDetails.aspx?UrlPage=&ID=920> Accessed 08 08 19
  37. Page 1 and Page 34 of Report on InsurTech- Working Group Findings & Recommendations
  38. Clause 3(35) of the Personal Data Protection Bill, 2018 provides that "Sensitive Personal Data" means personal data revealing, related to, or constituting, as may be applicable– (i) passwords; (ii) financial data; (iii) health data; (iv) official identifier; (v) sex life; (vi) sexual orientation; (vii) biometric data; (viii) genetic data; (ix) transgender status; (x) intersex status; (xi) caste or tribe; (xii) religious or political belief or affiliation; or (xiii) any other category of data specified by the Authority under section 22."
  39. "Foreign Exchange Management (Foreign Currency Accounts by a person resident in India) Regulations, 2015 - Opening of Foreign Currency Accounts by Re-insurance and Composite Insurance brokers" - RBI/2018-19/167 A.P. (DIR Series) Circular No.29 dated 11th April, 2019.
  40. < https://www.hdfcbank.com/personal/learning-center/insure/ayushman-bharat-health-insurance-scheme-who-it-covers-and-how-it-works> Accessed on 26 07 2019
  41. "The scheme is expected to increase penetration of health insurance in India from 34 per cent to 50 per cent."- https://www.ibef.org/industry/insurance-sector-india.aspx> Accessed on 25 07 2019