At a time when the economic landscape of the country has been changing fast, the insurance sector does not seem to be matching the pace of transformation. Both life and non-life insurers have remained pre-occupied with selling insurance to the middle and upper class for expanding their customer base.
Life insurers stress on number of policies and the ‘first premium equivalent’ for showcasing their growth. The non-life insurers keep highlighting their performance which is largely dependent on the statutory business. Their growth is induced by automobile and healthcare sectors. Health insurance premium is the highest contributor to the 24%-plus growth of the non-life industry during the last three years.
Growth in ticket size
However, motor and health insurance have been loss-making business for them. Hence, yearly growth in premium income is an illusion created by a commercially unviable segment of business. Insurers often celebrate growth in ticket size of premium and digitisation of many processes as indicators of transformation in insurance business. Growth in ticket size is the effect of unit-linked insurance products (Ulips) as well as rise in income level of the middle and upper class people, mostly in the urban centres where the private sector invests most of its resources. State-owned LIC which secures business from urban and rural areas cannot boast of earning higher premium per policy.
Similarly, non-life insurers keep ignoring the insurance needs of the people and do not promote non-conventional products which people really need.
The industry boasts of large scale adoption of technology for boosting business. The technology adopted by them, however, is intended to streamline working in offices and to provide ease of access to the policyholders. But the fast changing socio-economic eco-system is likely to be very ruthless to those who refuse to upgrade themselves into an organisation which is sensitive to the substantially changed demands of the people.
Therefore, growth rate over the previous year performances does not mean much because such a growth is either not enough or not relevant to the prospective customers belonging to the new generation. The insurance schemes introduced for bank account holders by the prime minister three years ago points to the vast untapped potentiality that existed in the market for such a long time.
These two developments point to the changing landscape. There is a need to redefine potential customers and their insurance needs. In the non-life sector intense competition is seen among the insurers to outsmart each other in grabbing existing customers. There is no competition for expanding the market with more effective distribution system. The current scenario is not changing because no company takes initiatives to enhance the awareness of insurance products.
If advantage is taken of the growing digital environment to reach out to potential customers and provide comprehensive cover easily, growth can be achieved at an accelerated rate.
Companies need to upgrade products and service delivery. In non-life business, in addition to the usual product offerings the companies need to cater to all kinds of risk for an individual or a family. In modern times, cyber security and related laws assume much more importance than many physical assets. Even the regulator needs to roll out new rules to govern digital sell and purchase of insurance so that the speed of buying and owning an insurance policy is not neutralised by hassles on points of law at the time of settlement of claim. For the growth of the insurance sector a very supportive regulatory framework is required. An environment of freedom for growth must be provided with clear priority to the interest of customers in all situations. Good return for the policyholders in life insurance and very comprehensive coverage and benefit to the non-life policyholders must be provided. The market should be made to feel that it is easy to own the policies to cover different kinds of risk.
The writer is former MD & CEO, SUD Life