Life insurers ramp up presence in Tier-II, Tier-III cities

The overall physical presence of life insurance companies in Tier-II and Tier-III cities increased in FY23 compared to a year ago period on account of the higher impetus given to financial inclusion by the government and insurance regulator, as well as recovery from the Covid-19 pandemic, according to the latest data released by the Insurance Regulatory and Development Authority of India (Irdai).

It is the first time that there has been growth in the number of offices since the financial year 2019-20.

As per the data, during 2022-23, the presence of the life insurers rose by nearly 3.5 per cent year-on-year (Y-o-Y) to 1,311 offices from 1,267 offices in 2021-22.

Similarly, in Tier-III cities, the growth was 2.21 per cent to 1,856 offices.

The number of offices in these regions by the private life insurers had consistently fallen from 801 in the 2019-20 period to 706 offices till 2021-22 before recovering to 749 offices in 2022-23 in Tier-II cities.

Likewise, in Tier-III cities, the presence had dropped to 458 offices from 500 offices before jumping back to 496 offices during the period under consideration.

Meanwhile, for the sole public sector company Life Insurance Corporation of India (LIC), the growth of offices in the Tier-II cities saw a nominal improvement to 562 from 561 in 2021-22 and in Tier-III cities it rose from 1,357 to 1,360.

The focus on financial inclusion, aim to increase insurance penetration, recovery from Covid-19 pandemic and intention to build customer trust has all together led to an increase in the number of offices,  said Vivek Iyer, partner, Grant Thornton Bharat.

Also, during the pandemic, it was these people in Tier-II and Tier-III cities that suffered the most and they will look at insurance as a way of protecting themselves against similar hazardous situations,  Iyer added.

The pandemic period led to a decline in office spaces due to increased work-from-home arrangements.

During the 2019-20 to 2021-22 period, the number of offices went down to 1,267 from 1,357 in Tier-II cities and declined to 1,815 from 1,850 in Tier-III cities.

The pandemic led to a drop in office spaces used during 2019   2022, with organisations moving to work-from-home mode.

Many insurers had freed up office spaces that weren t being utilised, said Subhankar Sengupta, chief marketing & development officer, IndiaFirst Life.

In November 2022, Irdai announced a commitment to enable Insurance for All by 2047 whereby every citizen has an appropriate life, health and property insurance coverage and every enterprise is supported by appropriate insurance solutions.

The reformative agenda was taken by the regulator in line with the Government of India’s vision of financial inclusion.

The increase in the number of offices can be seen as an effort to increase penetration and companies will have to go deeper to increase penetration and awareness of insurance.

During the pandemic, insurance companies were facing high payouts and companies were pulling down on their expenses.

Now, since the conditions have stabilised companies are making these investments to boost business, said Karan Gupta, Director and Head of FI, India Ratings.

According to the report, as of March 31, 2023, the public sector life insurer had offices in 688 districts out of 750 districts in the country covering 92 per cent, whereas the private sector insurers had offices in 604 districts covering 81 per cent of all districts in the country.

In 21 out of 36 states/UTs, all the districts were covered through life insurance offices.

The number of districts without a life insurance office stood at 59 in the country, out of which 49 districts belong to the northeastern states.

Going forward, insurers expect the number of offices to further rise.

The number of offices will reach pre-Covid levels to cater to the customer base residing in the hinterlands which will require more branches in these markets, Sengupta added.