The Indian insurance industry is on a growth trajectory. Since privatisation, the number of private insurers has grown ten-folds, and penetration of life insurance alone has increased to 2.6 % as on 2015, from 1.5% in year 2000. Having said that, insurance is still sold, not bought. A case in point is the Pradhan Mantri Jeevan Jyoti Bima Yojana. The scheme was launched in 2015 with the support of banks. While the renewal rates went up by almost 90%, in the second year the new enrolments were very few. Altogether, three crore lives have been insured in PMJJBY against the 132 crore population and 17.24 crore of Jan Dhan accounts.
To look at the bright side, the penetration of life insurance, thanks to the PMJJBY scheme, has been remarkable. We need to build on this awareness to realise the potential of the industry.
The year gone by
The insurance industry witnessed quite a few historical breakthroughs in 2016, such as merger of two large insurance players, fallout of joint ventures and the first ever IPO in the insurance space. It is yet to see the benefits of the FDI limit increase from 26% to 49%. We believe that the related regulations around Indian ownership and controlled businesses and the CCI provisions had an impact on the assessment of opportunity.
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During the year, the regulator initiated several changes for the life insurance sector with exposure drafts on expense management, remuneration to insurance agent and intermediaries, corporate governance, and convergence to the Indian Accounting Standards being the key highlights. Further, regulatory enablement to open architecture for bancassurance, POS product and eInsurance regulations for tab-based applications to issue policy via electronic modes created new opportunities.
The recent currency demonetisation has seen many unbanked or underbanked individuals in the country moving into the formal banking channel. We believe this will have a direct positive impact on the formal channels of savings, including life insurance.
Digitalisation and its impact
One common theme that emerges as the “go to” objective for a life insurance company is about increased efficiency and corporate governance. We believe that leveraging technology beyond the conventional backend processes is the way forward. Even companies like us, who have more than 90% of new business applications coming in through digital channels, feel that we are underleveraged on technology.
Big data harnessing, virtualisation, usage of bots, analytics and predictive modelling are all opportunities to be realised to achieve the primary objectives. Enhanced productivity through higher conversion of leads can be achieved using the digital footprint to offer customised and need based solutions, simplifying the entire sales cycle. Mobile and electronic wallets, as alternate payment methods, are the most progressive outcomes of demonetisation, which will serve as an enabler for digitisation of initiatives by insurance companies.
The future looks promising for the life insurance industry with the changes in the macro environment and regulatory framework working as enablers. Creating an effective strategy, including taking advantage of the opportunities arising from InsurTech and artificial intelligence, will ensure that business models are fit for growth.
The author of the article is RM Vishakha, MD & CEO, IndiaFirst Life Insurance