Jeevan Jyoti Beema Yojana and Suraksha Beema Yojana, recently launched through the banking network by the Centre, have proved fairly successful in ensuring ease of access to the poor and the middle-class citizens in both rural and urban areas
The two insurance schemes, recently launched through the banking network by the Centre on the initiative of Prime Minister Narendra Modi, have proved fairly successful in ensuring ease of access to an important financial service to the poor and the middle-class citizens in both rural and urban areas.
They had so far remained underserved by the insurers to a very large extent. Marketing limitations of the private as well as the public sector insurers had deprived successive generations of the population at the bottom of the pyramid of the much-needed financial security.
The Prime Minister, finance minister and officials of the Department of Financial Services must be given due credit for their vision and successful implementation of the Jeevan Jyoti Beema Yojana and the Suraksha Beema Yojana.
The strong political will inspired the insurers to shed their traditional conservatism and float simple insurance plans with affordable premium for the customers, but at a very challenging rate for themselves. Though the regulator has also approved the common premium rate, first year’s experience will be keenly watched to evaluate the financial viability of the schemes and the enormity of benefit percolating down to the beneficiaries.
Insurers must find ways to minimise cost in managing the schemes, from processing an application to settlement of claims, even though a substantial part of the risk may be shared with a willing reinsurer.
The successful launch of the scheme points to two imminent business opportunities. Greater awareness about insurance by the masses will lead to greater demand for insurance at the individual level and insurers will have to come out with new distribution channels or apps to tap and drive a paradigm shift in the way insurance is bought and sold. Much will depend on the passion of the industry leaders to change fast. The success of the e-retailers may reinforce what I intend to highlight here.
If the customer’s experience is of utmost satisfaction in regard to a neighbour’s death claim settlement process or, after floods, if people observe a co-villager coming back to terms with the harsh reality, with very timely support coming through the insurance claim settlement in a hassle-free manner, the resistance to buy insurance could slowly wither away.
The PM’s schemes may prove a major game-changer and may even sweep the country with new understanding about the purpose, utility and importance of insurance. In fact, insurance may soon cease to be a subject matter of solicitation and become a matter of intuitive purchase. This revolutionary step by the government will explode many myths associated with insurance.
Insurers will have to go for total transformation of their business model. Adoption of latest technology for speeding up operations and distribution is within visible sight. Engagement with customers at pre-sales and during post-sales interactions will be crucial. A simple mobile application may be helpful in this regard. However, adoption of technology for grabbing attention of potential customers is to be mapped very carefully because research at global level, too, suggests that when it comes to insurance the customers still prefer one-on-one interaction to understand a product or the sales transaction better.
However, technology must be adopted for reducing operational cost with a view to substantially reduce premium rate for life as well as non-life products. For example, if data analytics indicate that owners of luxury cars are less likely to die in an accident because of in-built safety devices or people who undergo annual health check arranged by employers are less likely to undergo open-heart surgery, the insurers should charge lower accident insurance or health insurance premium from them.
Similarly, health insurance premium rate for small-town policyholders could be substantially lower if analytics indicate that only very few of them are likely to go to Metros for treatment.
In India, the penetration of non-life insurance is below 1% even though the sector is growing at a rate higher than the GDP. Hence, the insurers must start looking at this new development piloted by the PM himself as an opportunity to build up substantial retail portfolio.
Very poor distribution network has been responsible for pulling down the penetration rate of non-life insurance business in our country. Simpler versions of health and householders’ policies can be mass-marketed. One-page form and only Aadhaar or bank account number for KYC should be the entry requirement. The PM’s project has the potentiality to create an ecosystem conducive to adoption of insurance as a way of life. Insurers have to seize the opportunity and thrive by projecting insurance as a natural add-on to a bank account.
The writer is advisor, GIC Re and former MD & CEO of SUD Life