In this article, we are looking to understand the effect of the last two years—2019-2020 and 2020-2021—on the motor insurance industry in India.
Impact of the pandemic on the motor insurance industry in IndiaThe last two years have been challenging for almost every sector, and insurance was no exception. It faced challenges across the board—from claims processing to premium collections and overall demand. The Indian motor insurance industry was among the most affected within the insurance space. Predictably so.
While health insurance saw a surge, motor insurance struggled due to lockdowns, low vehicle sales, and an overall economic slowdown.
To get an idea of the impact of the pandemic on the motor insurance industry, we collated their revenues from the IRDAI website.
For a brief overview of the industry and the changes, you can refer to the infographic below.
Revenue
2018: Revenue per company breakdown2020: Revenue per company breakdownOur ObservationsDigital companies are seeing growing traction
COVID-19 accelerated digital transformation across the industry.Online insurance company ACKO saw a 120% increase in the number of auto insurance policies sold in Q1 FY22 vs. Q1 FY21.Edelweiss also saw growth, focusing on digital insurance.SBI saw stability with the launch of their digital app
State Bank of India launched its digital platform YONO, which was later expanded for other banks to use.YONO allows banks to integrate APIs for seamless insurance distribution without going through SBI’s core banking system.Navi Insurance saw growth with the launch of their app
The Navi app launched a collateral-free loan facility alongside integrated insurance offerings.The app saw rapid adoption, targeting middle-income customers.Commercial vehicle markets took a hit
With remote work policies, fewer vehicles were on the roads, reducing demand for motor insurance.Total kilometers driven declined by over 50% from March through August.New vehicle purchases dropped, leading to lower insurance policy sales.Rise of Start-and-Stop Policies
The government introduced flexible motor insurance payment models to support struggling businesses.The start-and-stop policy option allowed policyholders to pause and resume coverage, reducing costs.
Conclusion
The pandemic heightened the importance of value-based insurance consumption. Indian customers have always been price-sensitive, and COVID-19 reinforced the need to pay only for what they use.
As of Q1 FY21, the motor insurance industry has shown signs of recovery, albeit at a slow pace. However, the long-term outlook remains positive as insurers adapt to digital models and flexible pricing structures.
