Insurers need to enhance potential to think differently

Life insurers are introducing products that they have been in the markets since 2001, but in newer forms.

Life insurers are introducing products that they have been in the markets since 2001, but in newer forms. The new product guidelines, motivated by customer protection concerns of the regulator, forced this metamorphosis. The haste to ensure compliance and relaunch products from the cut-off date led to a mere repackaging of the popular products. As a result, the industry missed a great opportunity to innovate products which could have triggered growth and expanded the business.

The impact of the rollovers is not reflected in any remarkable growth in new businesses. In an HBR essay published in 1992, Peter Drucker said, “In a matter of decades, society altogether rearranges itself.” The insurance industry must take note of this fact.

The life insurance business has been going on since 1956 and the market has been conditioned by the perception that life insurance is a push product. On other hand, non-life insurers have been treated as provider of legally required risk cover and not as risk-mitigating agency for any kind of loss of life, property or income due to unavoidable situations.

With 900 million mobile phone users, companies need to innovate products, distribution channel and services delivery system around the mobile platform. This not only makes business simpler and cost-efficient, but enable companies to interact with the customers effectively. A non-life insurance company promoted by a large business house adopted this strategy and reached out to people even in remote areas following a paperless delivery system. The company could achieve success only through disruptive strategies.

While telematics could enable non-life insurers to develop differentiating products, a thorough demographic research and study may help life insurers develop products with greater content of long-term care and regular income beyond one’s earning years.

There is an urgent need for a research that could outline a clear picture on the needs of the prospective buyers. Risk of loss of income by a family due to sudden demise of the head of the family is losing prominence not only due to structural changes but also due to innovative tools and mechanism of risk mitigation and risk transfer. Another challenge is of catering to socially, economically and demographically heterogeneous markets.

The ever increasing work-related stress, lifestyle induced health hazards coupled with the speed of conducting business demand innovative mechanism of risk management. Therefore, maintaining the relevance of products and services would be critical for the insurers to survive. So far, under-insurance has been a common phenomenon because the price structure of life, health or even motor insurance cover is not affordable for the common man. In the given pricing and distribution model, lowering of cost is difficult.

There is a need to build reinsurance capacity within the country to bridge the gap between the risk appetite of the insurers and the risk mitigation requirement of the insuring public or business entities. To deepen the reinsurance capacity in India, the regulatory framework should be restructured. This is urgent because with rapid economic and industrial growth expected under the new government, the insurance needs would grow. Both insurers as well as the reinsurer will require alternative capital and policies need to be framed for insurance-linked securities also. The insurance industry therefore needs to enhance its own capabilities to think differently. A reinvention is long overdue.

The writer is advisor, GIC Re, and director, India First Life Insurance

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