India's insurance landscape set for transformation with Bima Sugam

Hyderabad: India has been on an innovation drive, particularly in the digital domain. The JAM stack (Jan Dhan accounts, Aadhar and Mobile) has been instrumental in revolutionizing not just the implementation of govt. schemes but also in advancing digital banking and payments. Similar attempts are being made to build infrastructure in various other sectors to make a seamless penetration and expansion. Per the GIC, the General Insurance Council, the current insurance penetration is partly 1 per cent while the global average is over 3.9 per cent and from the current 10th largest insurance market in the world, India is poised to be 6th largest by 2032.

For such a huge transformation, digital initiatives are being considered by the Insurance Regulator and Development Authority of India (IRDAI). Accordingly, last week, it issued a draft regulation on the much-awaited launch of the insurance marketplace. This concept has been in the thoughts for a while and as a precursor to the full regulation, Bima Sugam, the insurance electronic marketplace, to bring all the stakeholders including the intermediaries, insurers and policyholders has been announced.

While increasing the penetration of insurance, this initiative aims to enhance affordability, accessibility and availability to citizens. Bima Sugam will be a one-stop solution for all insurance stakeholders to promote transparency, efficiency and collaboration across the insurance value chain. This technological innovation would universalize and democratize insurance to achieve the vision of “Insurance for all by 2047”.

Per the draft, the platform would be a not-for-profit company under section 8 of the Companies Act, 2013. It shall establish, facilitate, develop, operate and maintain the marketplace for providing various services to the insurance stakeholders. The shareholding of the company would widely held amongst all the life, general and health insurers with no single entity having a controlling stake. Shareholders will contribute to the capital as and when required. IRDAI would nominate two members to the board of the company.

The draft regulation is a culmination of close to two years of work by the regulator, now eliciting comments from the public by 4th March. The proposed guidelines include a board to constitute a Risk Management Committee to mitigate various risks, prior approval of authority for the appointment of chairperson & CEO of the company, to build consent-based architecture for the services and consumers shall not be charged for availing services of Bima Sugam.

Various policies across life, travel, health, motor & other general insurance products are listed on this platform. Customers could buy insurance policies through an agent, aggregator or insurer from this platform. Bima Sugam not only helps in the purchasing the insurance plans but also in servicing i.e., renewing, handling grievances as well as record keeping of the existing insurance policies and even settling claims. This could turn a game-changer for the industry as it has the potential to reduce costs (intermediation or commission fee) and intensify competition thus making it more affordable and available for consumers.

The IRDAI chairman quoted this digital platform as a potential UPI (Unified Payments Interface) moment for the insurance industry. Mid-last year, the IRDAI chairman sought the opinion and allay the concerns of the various distributors on the impact of their business through this medium. He then pointed out that they too could benefit through this marketplace by using it for selling various policies. He commented that it would improve efficiency in their distribution with more jobs being created.

The author is a co-founder of “Wealocity”, a wealth management firm and could be reached at [email protected]