The pandemic-induced awareness brought in heightened demand for pure protection term plans and guaranteed return plans on the back of assured financial protection for future money needs.
“The drift towards secured avenues of protecting and growing money, coupled with risk-averseness, saw the share of ULIPs dipping a tad bit, giving way to term plans, despite the hike in the premium rates of pure protection covers,” says Kamlesh Rao, MD and CEO, Aditya Birla Sun Life Insurance.
In an exclusive interview with Priyadarshini Maji, he explains how life insurance has evolved in the last one year from just being a tax-saving tool to a comprehensive and reliable financial protection solution for people, and its way forward. Excerpts:
What have been the purchase trends for various insurance solutions in the last one year?
The pandemic has been an uncertain moment in people’s lives and has been around longer than expected. The need to protect one’s health as well as finances have created a pull for a largely push-driven, underpenetrated segment for life insurance. The industry witnessed heightened demand for pure protection term plans and guaranteed return plans, on the back of assured financial protection for future money needs. The drift towards secured avenues of protecting and growing money, coupled with risk-averseness saw the share of ULIPs dipping a tad bit, giving way to term plans, despite the hike in the premium rates of pure protection covers. This trend reinforced that in the past year, life insurance further evolved from just being a tax-saving tool to a comprehensive and reliable financial protection solution for people.
Which Innovations and trends in products should be expected in 2022, especially in term plans?
One size fit all products will not appease the customers anymore. The aware customer will need adequate life insurance and would like to be covered for specific risks. Hyper-personalization will take a leapfrog and companies will focus on simple, innovative, and differentiated products to cater to policyholders’ emerging needs. This will lead to innovations in the space of protection (Term plans) and health-related covers.
Besides this trend, customers will have to brace themselves for significantly higher prices for the term plans as the re-insurance premiums might go up by 50 – 70 per cent from the beginning of 2022. By next year, insurers will also play an increasingly prominent role in the health of their customers, as the trend in 2022 will be around wellness. The move by IRDAI to include wellness in life products is a welcome one, which will allow various innovations in product features and offerings. Unique and specific health rider propositions coupled with Term plans may hit the market.
According to you, what will be the fate of traditional distribution channels given the rise in digital distribution?
The rise has happened in digital enablement and not digital distribution, pre se. In the last one and a half years, digital enablement took leaps owing to its adoption by the existing or traditional channels like the advisors and bancassurance partners, and this trend will continue to strengthen from hereon. Digital distribution is slowly catching up, and even today contributes only in a single digit to the insurance industry’s distribution share. It still has a long way to go before it creates its dominance over the traditional distribution model.
While consumers are getting used to the digital way of insurance transactions, there will be still certain customer segments and types of products where the physical mode will be preferred. For instance, people prefer a bit of explanation to understand the benefits of traditional and endowment products, thus buying them offline. While simple products like term plans and ULIPs are easily accessed by people online. Therefore, both the traditional and the digital channels will be important to reach out to people, especially in a severely underpenetrated country like ours, and both the channels will coexist.
Uncertainty and hoarding of cash increased investments in insurance, with retail consumption getting back on track from Q2 – Will this trend of investing in insurance solutions continue?
The pandemic prompted individuals to opt for life insurance policies to protect and save their finances. This increased awareness coupled with the emergence of the second wave led to heightened interest in pure protection plans.
Simultaneously, falling interest rates and uncertainty in business and the job market created a pull for plans offering guaranteed returns which gained further prominence. While, I agree that in India memory is short and people can easily forget incidents, but in my view, the impact of the pandemic over these 2 years has been permanently fixated in our minds. It has impacted individuals and families, irrespective of age and income levels, and therefore can’t be easily forgotten. This trend is here to stay as people will continue looking for avenues to protect and conserve their wealth in a risk-free and assured manner.
Highlight digital initiatives to drive customer service
In the last couple of years, we have been working on digitizing the entire process of service. ABSLI has applied technology to every customer touchpoint to ensure faster processing, superior experience and adoption of remote working for both our advisors and customers. The company has also embraced some of the digital stat tools like e-KYC, integration with payment wallets and credit check facilities, which has further enabled ease of transaction and digital checks.
Your views on Financial Year 2022 Outlook
The pandemic that lasted longer than expected will remain etched in our memories. It has made customers aware, realizing the need and the real potential of life insurance. The industry will see the trend continuing. Individuals will opt for securing their future financial responsibilities with term plans and guaranteed return plans. There will be increased demand for child products and retirement solutions.
Technologies such as machine learning, combined with growing digital connectivity, will enable substantial leaps in the development of the life insurance industry offering customers increased transparency, on the go access, speedy transactions and need-based customized solutions. The pandemic-induced awareness provided a window for life insurance companies to increase the insurance penetration and ensure that the customers are adequately protected, something the industry could not achieve in the last 10 years. All these trends coupled will bode well for the industry and will accelerate its growth path for the next 3-4 years.