India’s Auto Insurance Sector – A Growth Story

With a thriving automotive industry showing significant growth, the Indian motor insurance market has emerged as one of the fastest growing sectors. A steadily growing economy, rising consumer disposable incomes and an increasing preference for personal mobility have made India the fourth largest automotive market in the world. Several government policies such as FAME-II, PLI programs for semiconductor manufacturing, and advanced chemical cells have given further impetus to the automotive sector, which in turn boosts the insurance market. This has led to a surge in the motor insurance industry in India, which accounted for 34.1 percent of non-life insurance premiums earned.

The rise of the insurtech

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

Along with the rapidly growing digitization, partnerships between automotive companies and financial service providers have enabled better insurance penetration in the ecosystem.

The rapid adoption of digital tools by 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 more widely available through Insurtech. Insurance companies are also working with financial service providers to integrate technologies like AI and blockchain into their operations.

Today’s consumers are more informed and more selective about their preferences, looking for tailored offers and personalized communications to meet their complex needs. This has led to insurance companies making extensive use of data and technology. The use of artificial intelligence (AI), Internet of Things (IoT), machine learning and telematics has grown exponentially, enabling companies to digitally transform their businesses and adapt to changing customer behavior.

AI not only helps create unique experiences for consumers, but also enables insurers to collect and analyze data faster and more accurately while eliminating the human element. Machine learning is revolutionizing how files and complaints are processed and accessed, and how complex processes are systematized and streamlined.

The constant shift towards a digital world has increased consumer expectations. With the ability to buy policies online, read reviews, and compare policies from different insurers, they expect seamless and more personalized experiences. This has led to the emergence of AI chatbots. Equipped with dynamic question and answer mechanisms, chatbots are now steadily establishing themselves as an innovative, cost-effective solution to meet the growing needs of customers and enhance their experience.

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In contrast to legacy processes, lengthy paperwork and complex affairs, chatbots as a listening channel enable claims to be processed efficiently and expeditiously

UPI transactions and policies like Bima Sugam, a one-stop shop for policy sales, renewals and claims adjustment, will fundamentally transform the insurance industry. Ventures like this offer operational excellence via a centralized Original Equipment Manufacturer (OEM) and Original Equipment Supplier (OES).

The government sees the future of the insurance industry in digitization and is striving for a balance between orderly development of the industry and security
To consider the interests of policyholders and at the same time to enable innovations. To this end, IRDAI introduced the Regulatory Sandbox, which aims to create a safe and conducive environment for experimenting with innovative approaches.

Insurance Regulatory and Development Authority of India Regulatory SandboX intends to use innovative ideas to fuel growth and increase the pace of the most innovative companies in a way that offers flexibility in dealing with regulatory requirements while focusing on protection the policyholder concentrates.

Robust guidelines for victory

Aside from the Motor Vehicle Act 1988 which states that insuring a motor vehicle that covers third party risk is a legal requirement in India, the nation is now saying goodbye to orthodoX methods and looking to newer insurance options. Bima Sugam is a classic example of an insurance revolution, allowing policyholders and customers to choose from different products, deals and payment options on this platform. This will not only democratize the insurance sector, but also make it more efficient and sustainable.

Hailed as a game changer for the insurance industry, Bima Sugam will revolutionize digital insurance distribution in India. The one stop shop Bima Sugam will allow policyholders to have their own e-Bima accounts showing all their respective insurances be it health, life, motor, general fire etc. Policyholders can access it , whenever and wherever you want . Policyholders will also be able to access and monitor all of their policies and make premium payments. The platform will also be of great use to IRDAI in monitoring and preventing fraudulent practices.

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Along with the revolutionary Bima Sugam, usage-based insurance services such as pay as you drive and pay as you drive have simplified access to insurance services and contributed to widespread awareness of auto insurance.

Pay As You Drive is a customizable insurance policy that provides mandatory liability but is based on distance traveled by the vehicle. With this policy, the premium is based on the mileage of the insured vehicle.

Pay How You Drive is a telematics-based car insurance that calculates the premium based on driving behavior. The better and safer the driver of the car, the lower the premium.

India – the sweet spot

India has recently emerged as an ideal place for investment. Treasury announced it would infuse Rs. 3,000 crores ($413.13 million) into state-owned general insurance companies to improve the companies’ overall financial health.

This was possible for three main reasons:

High Demand – People’s increasing interest in insurance, innovative products and distribution channels support growth. Life insurers’ gross first-year premiums increased by 12.93 percent in 2021-22.

Attractive Opportunities – While insurance coverage in India is still low, overall insurance penetration (premiums as a % of GDP) was 4.2% in FY21, presenting a huge underserved market. The Insurance Regulatory and Development Authority of India (IRDAI) allowed insurers to invest in Debt of Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs); This is expected to provide more investment opportunities for the country’s burgeoning startup ecosystem. And with the arrival of the new chairman to increase penetration, he has introduced new policies.

Political Support – As of April 2022, the Government of India intends to raise Rs. 50,000 crore (US$6.62 billion) through the IPO of LIC. In September 2021, the Union Cabinet approved an investment of Rs. 6,000 crore (US$804.71 million) in companies providing export insurance cover to secure additional exports worth Rs. 5.6 lakh crore (US$75.11 billion). in the next five years. In August 2021, Parliament passed the General Insurance Business Amendment (Nationalization) Act.


For almost a decade, India faced the challenge of tackling low financial literacy, but with rapid digitization and acceptance of newer technologies, insurers are finding ways to reach the masses and make insurance easier for them. Additionally, the pandemic has rapidly moved insurance to online modules and with that, insurance companies are now working towards a seamless end-to-end buying journey.

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With increasing consumer awareness come context-sensitive and coherently structured insurance modules, making it more attractive and convenient for new-age customers.

Also read | Digitization enables a brighter future for the insurance industry

There is a great opportunity for insurers to educate consumers about the benefits of motor insurance and its vital role in reducing the number of uninsured vehicles on the road. Constant customer education brings clarity to consumer expectations, ultimately leading to the building of hassle-free experiences and relevant products.

Along the road

Strong growth in the automotive industry is expected to boost the motor insurance market over the next decade. Post-Covid, increasing demand for personal mobility space is changing vehicle ownership patterns and may create an opportunity for auto insurers. The need of the hour would be to ensure consumer literacy and awareness, along with identifying key demographics and making best use of conducive government policies. Also, increased partnerships between financial institutions and automotive companies ensure hassle-free experiences. While the sector has evolved rapidly over time, further digitization will lead to product innovation to keep up with changing times.

While the growth of India’s motor insurance sector has been negatively impacted by the Covid-19 pandemic, the industry is set to thrive on a large scale given the post-pandemic surge in vehicle sales and easy access to insurance. The industry was once fragmented in parts, but with various players coming to the fore and offering bespoke policies, the market will not only grow but also become a major player
Turning the economy in FY23-24.

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

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