Innovations in life insurance industry

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: Economic growth in the emerging markets has time and again outpaced the developed and industrialised countries. Alongside the rising importance of emerging economies, their life insurance sectors are also drawing more attention.

It’s been four years since the life insurance sector was opened up for private players in India. The reasons that prompted the government to bring in reform in this sector are well known. While the public sector life insurance companies made enormous contribution in the spread of awareness about insurance, and expanded the market, it was recognised that their reach was still limited, the range of products offered restricted and the service to the consumer inadequate. It was also felt that the rapid economic growth witnessed in the 90s couldn’t be sustained without a thriving insurance sector.

Today, the private sector accounts for nearly 20% of the market. The market share of the private players has to be seen in the context of this enlarged market. There has been a flurry of private players providing a wide range of innovative products, services and customised solutions. Emerging markets—such as China, India, Mexico and Russia— are home to some 86% of the world’s population. Collectively, they account for 23% of world economic output. Yet, insurance business is underdeveloped in these markets.

In fact, India as a country is under-insured. Only 35% of the 250 million insurable population is insured. Exploiting the growth potential of emerging insurance markets — India and China are in the spotlight. Both the countries currently attract a lot of attention due to their size, strong growth performance and favourable regulatory changes. To begin with, India and China are the most populous countries and both have sustained impressive economic growth in the last decade. Between 1993 and 2003, annual real GDP growth averaged 8.9% in China and 5.9% in India. Interestingly, both markets have gone through a similar period of nationalisation of their insurance business, although China revoked state monopoly earlier than India.

As the life insurance sector evolves, we will see a lot of transparency in products, costs. There will be a lot of value added services provided by insurers: financial advice, add-on facilities. There will be a revolution in term of the IT used and the level of automation. Also, there will be faster query handling and other issues relating to policy servicing can be made simpler.