Impact of Demonetization on Indian Insurance Market
Date: Monday , January 30, 2017
Headquartered in Kolkata, Greenlife Insurance Broking Limited (GIBL) is an online insurance marketplace that facilitates consumers with effortless search, compare, purchase and renewal of general insurance policies from all the leading insurance companies in India.
Demonetization, in a bid to curb black money which is one of the main constraints on the progress of strengthening Indian economy, has taken the entire country by storm. To get billions of unaccounted cash back and to trace out the true source of income of people, the decision of removing currencies with high denominations from circulation was taken. It is undeniable that this sudden act of demonetization has an impact on all industries, and Indian insurance market has its fair share as well. With the advent of fintech ecosystem, Indian insurance tech space has been coming off age over the past few years like other fintech verticals. The new age online insurance portals are easing out the traditional cumbersome process of purchase and renewal of insurance policies. In the aftermath of demonetization, online transactions in Indian insurance market are expected to go mainstream. Here are some consequences of demonetization that Indian insurance industry is most likely to face.
Boost in Online Cashless Premium Payment
As soon as the demonetization came into effect, common mass in India hopped a step closer to cashless transactions. Scarcity of cash and the ordeal of braving interminable queues in front of ATMs and banks have already forced people to resort to plastic money. Usage of debit and credit cards, along with net banking are becoming increasingly popular even among older consumers. Demonetization has proved to be the next big thing after UPI was introduced in last April in Indian economy.
To leverage this change and changing mindset of Indian insurance policyholders, portals of Insurance company, aggregator and brokers like GIBL.IN are also being proactive in ensuring that their customers\' online payment for purchase and renewal of insurance plans are fully safe and secured. Incorporation of SSL certificate will be a more widespread practice among online insurance business owners in coming years.
The market of online insurance in India presently stands at over Rs.700 crore. This, coupled with overwhelming growth in online payment industry which is predicted by Google (Alphabet Inc.) and BCG to reach $2000 billion by 2020 have well and truly paved the way for enormous rise of cashless payment of insurance premium.
Insurance Companies Shunning Sale of Policies Offline
Although, there is an upsurge trend of procuring insurance plans online in India, still the majority of insurance houses deal in cash, especially outside metro cities. Majority of people in suburbs and small towns are yet to embrace cashless transactions and they pay in cash to avail insurance cover. In the wake of currency ban, people either have to use lower denominations or wait a while for the new currency to roll into the market.
Chances are also high that insurance firms will forgo selling policies from brick and mortar offices as well. IRDA has already observed e-Commerce as an effective medium to boost insurance sales across the India. According to IRDA, the \'Insurance Self-Network Platform\' will carry out Insurance e-Commerce activities in India. This will not only be cost-effective as the companies will save on overhead costs, monetary transactions, but online sale of insurance plans will also promote transparency and greater reach with the increasing penetration of mobile internet in the hinterlands of the nation.
Furthermore, the Government has also been planning to make online payment mandatory once the premium amount goes past a certain limit.
Sprouting of Mobile Apps on the Cards
Of late, most insurance firms boast their own mobile apps that consumers can use to buy or renew insurance on the go. With the demonetization, a plethora of mobile payment apps will come into existence in coming days to facilitate cashless premium payment. According to Technavio, a market research company in UK, the mobile wallet market in India will grow at 140 percent by 2018 compared to 34 percent growth average globally.
User-Friendly & Intuitive Mobile Apps
The largest as well as the poorest socio-economic group will make premium payment online using mobile apps. Hence, these apps should provide a smooth payment experience to all by rendering easily understandable information. The developers need to ensure that these apps can be downloaded despite of slow or weak internet connection so that people in remote places can make use of them.
Regardless of the controversies about how prepared the government were at the time of making this decision, demonetization of higher currency is a bold move not only to have tax evaders caught red-handed but also a huge leap forward to making the long-cherished dream of cashless economy true. As the entire nation is jumping on the bandwagon of umpteen modes of digital payment, insurance industry is not far behind. This is well and truly a landmark moment in India’s economy, and demonetization is contributing to the fintech environment among insurance tech startups which is already booming.