The emerging trends post COVID crisis can be far-reaching. Pandemics can be short-lived, but the economic impact can be long-term.
The insurance industry in India has been growing at a steady pace over the past decade and both in the life and non-life segment. The growth rate of premiums for life insurance according to IRDAI business numbers for March 2020, is ~11 per cent (new business) and ~10 per cent for non-life segments. Over the past few years, as the market and market players have been maturing, we have witnessed the continued emergence of the private sector (especially in non-life), market leaders going public as well as a strong regulatory direction. The current uncertainty around the global pandemic notwithstanding, there is a significant growth potential for insurance with the overall penetration being on the lower side (~3.7 per cent) when compared with developed countries.
Impact of COVID-19 and emerging trends post COVID
The impact of COVID on the economy is unfolding with every passing day and in the current situation, it’s quite difficult to really understand the complete impact. Insurance is also impacted by the industry sectors it supports and hence industrial production, healthcare indices, and employment indices will also have an impact on its growth and recovery prospects. In the near term, premium collections have fallen given the prevailing lockdown scenario.
The emerging trends post COVID crisis can be far-reaching. Pandemics can be short-lived, but the economic impact can be long-term. While we are yet to see firm indicators of trends, the impact will definitely be felt across society (socio-economic and behavioral impact on consumer preferences), technology (use of virtual modes regardless of distance), economic (fiscal stimulus packages, irreversible impact to certain segments and businesses especially MSME sectors, the emergence of new business and operating models), environment (more focus on environment conservation) and role of governments and its policies.
Insurers are responding to the COVID outbreak on multiple fronts – as claims payers, employers, and capital managers. Each role played by insurers is faced with its own unique challenges, not just for the insurance industry but for the economy and society at large.
The role of innovation, especially digital
Given the unique market construct of India with its demographic distribution, differentiated segments, the advent of large government-sponsored schemes (PMFBY, PMJAY), and burgeoning middle class, innovation is inevitable. The digital adoption of insurance has been at par if not higher than its counterparts in the banking industry with increasing penetration of online business and integration with fintech. Insurers are also benefiting from the digital payment programs and channels that banks have launched and the schemes that the government has announced to boost the digital adoption of payments.
The current situation has significantly accelerated the opportunities of digital engagement and digitized delivery for the insurance Industry. The migration of customers from physical to digital is expected to see a significant jump in the immediate future. The change in social and behavior patterns towards a more virtual engagement model regardless of distance will further boost this growth. The use of digital payment mechanisms and increased ubiquity of smartphones will be factors in this growth.
The bigger impact of digital engagement will be on the components of the insurance life cycle. With the transition to work from home and remote operations, there will be an increasing focus on cybersecurity and protection requirements which will present the non-life insurance companies opportunities to innovate and expand their product offerings.
On the operating model, there needs to innovative means of ensuring employee engagement and securing work from home protocols to ensure data security and continuity in the operations of the Insurers. Digital means of On-boarding, Underwriting, and KYC process, use of remote sensing, and drone technologies for claims assessment and surveys are expected to increase. Origination models will get more online focussed and online customer journeys will need to be significantly enhanced to cater to a wider cross-section of the population.
It’s critical for insurance companies to devise multi-pronged strategies across possible scenarios and ensure a state of agile response across all. These scenarios can be predicated both at a macro as well as a segment level and will depend upon the effectiveness of the response mechanism of the policies, healthcare systems, and the implementation of the government directives across all constituents.
by, Himanish Chaudhuri, Partner, Deloitte India