Rajesh Sud
The year 2017 started on a good note when the life insurance industry built the growth momentum on the platform provided by demonetisation. Contrary to the general belief that the life insurance industry might be hit by the sudden demonetisation announcement, it grew by 22% from September 2016 till March 2017 and that momentum has continued during the current financial year. Introduction of GST in July 2017 is another major step towards bringing more business into the formal economy which is expected to have a long-term positive impact on Indian life insurance industry. Wealth in financial assets held by individuals grew by 14.63% in FY17 and is expected to continue this trend over the next five years as per Karvy’s India Wealth Report.
Foundation for growth
The year 2017 has laid the foundation for a sustainable industry growth with almost all life insurers recording high double digit growth. As per Icra, the Indian life insurance industry is expected to grow at the rate of 15-18% in the next fiscal. A stable government augurs well for the economic agenda with a clear majority in Lok Sabha and growing presence in Rajya Sabha. GDP is expected to come back on track and grow around 7%. Unfortunately, even though 70% of Indian households own life insurance, the penetration rate continues to be below 3% of GDP which is indicative of the need to create awareness about the right reasons for buying life insurance.
Year of insurance IPOs
The year 2017 could well be called the year of insurance IPOs. During the year, three life insurance, two general insurance companies and one reinsurer came out with IPOs and the interest shown by investors indicates the confidence they have in the future of the Indian insurance industry. Retail investors now have the option to participate in growth story of four pure-play life insurance stocks. Digitisation became essential and many players focused on plans that were distributed exclusively through online channels. Insurers heavily focused on distribution digitization. While online purchase journeys were re-designed and mapped to different customer personas, the sales force on the ground—the agents—was equipped with digital tools to suggest suitable options to the customer on the offline front. Customer chatbots were introduced to efficiently service the existing customers round the clock.
After an eventful 2017, will 2018 face the burden of high expectations? The demographic and social milieu will open new opportunities as there will be prospects for life insurance at both ends of the age spectrum. India’s millennial and elderly population is expected to cross 45 crore and 10 crore respectively by 2020. However, to play its legitimate role in retirement segment, the government should provide equal opportunity to pension plans by life insurance through income tax benefits in line with NPS. Millennials will be seen playing the role of key decision-makers in nuclear households, making them even more important.
Digital transformation
Digital transformation is expected to gain further strength. Technological advancements such as chatbots will be seen solving the customer’s problems more often. Better prospects of customised marketing will emerge with growing use of artificial intelligence based programmatic marketing. IOTs like wearables will be seen broadcasting data on health more often, resulting in pre-designed customised solutions offering by insurers. Data will be the new currency and leveraging it will be of critical importance. This will play a significant role in reshaping the way insurers connect, serve and engage with existing customers. Digital transformation will have its impact on the distribution set-up of the life insurance industry. Direct to customer distribution including e-commerce will gain further momentum with more millennial customers and life insurance players getting superior digital capabilities. Traditional offline distribution channels like agency distribution and bancassurance will also have digital support which will help these channels engage with customers better.
With private equity players and venture capitalists allowed to play the role of promoters, a new breed of promoters are expected to emerge. This may give rise to a new set of nimble-footed, hungry players leading to further growth of the industry. In the year 2018, as the economic, social and political
environment continues to be favourable, players should make efforts to enhance their engagement with customers regularly to help them understand the true purpose of life insurance. The time is just right to build a robust customer centric life insurance industry for a safe and secure society.
The writer is executive vice-chairman and managing director, Max Life Insurance