Embedded Value: A need for innovative insurance products

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December 25, 2020 12:45 AM

A policy with a wide range of benefits that could enable a policyholder to overcome challenges due to the Covid-19 pandemic is urgently required

Lockdown and the preventive precautions and measures at individual as well as at the organisational levels have transformed the whole social and economic ecosystem globally.Lockdown and the preventive precautions and measures at individual as well as at the organisational levels have transformed the whole social and economic ecosystem globally.

The very nature of life insurance business rules out opportunities for frequent or periodical customer engagement for enhancing bonding with policyholders. Payment of premium at fixed intervals does bring the customer in contact with the organisation but in a couple of years the activity is either taken over by the intermediaries or becomes just a mechanical exercise not yielding any extra value either for the policyholder or for the insurer. But as the Covid-19 dominated 2020 gives way to the new year, the fallouts of the pandemic may act as a major catalyst to transform the aforesaid relationship.

Lockdown and the preventive precautions and measures at individual as well as at the organisational levels have transformed the whole social and economic ecosystem globally. Work from home (WFH) overturned many universally accepted norms in the business world. The emerging scenario is opening new avenues for innovations and technology driven opportunities for speeding up production and distribution as well as for developing more effective tools and strategies for customer creation. Life insurance being a service industry, marketing intangible products, will be facing greater challenges in the coming year. Maximising value for money and simplifying product offering by introducing innovative products which satisfy multiple needs through a single purchase may go well with the youth today.

Need for unconventional insurance products
The onset of the pandemic, ever increasing incidence of people succumbing to the virus and the cost involved in quality treatment have brought to surface an awful gap between what a common endowment or term policy provides and what the policyholder really needs in such a situation. Insurers as well as the policyholders have realised that there is a need for unconventional products which the customers can utilise in a variety of situations to get not only value for money but also to tackle unforeseen situations like the pandemic. In the current decade, digitisation of every conceivable need of the customer for empowering her to enhance, alter or diversify the benefits within a broad parameter from the comfort of her home may soon be a major differentiator.

Insurance has to be more flexible and more comprehensive in its features so that the money invested yields necessary financial support when it is needed most and that too in the most unexpected situations. People have lost breadearners to the pandemic, breadearners have lost jobs if they have escaped the virus, entrepreneurs have lost buyers or customers even if they have managed to keep the production floor active through a skeleton workforce. A policy with a wide range of benefits that could enable a policyholder to overcome the current crisis has been conspicuous by its absence.Covid-19 has also highlighted the urgency to have health cover as an in-built benefit in a common endowment or money back policy. The product development teams of insurers must explore the possibility of providing financial support if the policyholder gets afflicted by a pandemic as they do in the case of permanent or partial disability.

Convenience to policyholders
The pandemic is also motivating insurers around the world to develop apps and other tech capabilities which would offer convenience to the policyholders to switch benefits as and when they feel the need to do so. It is, of course, understood that such switches would be within the financial parameters. But denying such access in the prevailing technological scenario would be a regressive policy which may ultimately push the insurers into an inescapable crisis. It is expected that the insuring public may experience innovative offerings on a large scale from the insurers.

The year 2021 must see large-scale data mining and application of Artificial Intelligence by the insurers. This may ultimately prove a game changer in the sphere of customer engagement and satisfaction. Intelligent solutions to make customer engagement a reality are likely to engage the attention of all the insurers in India. Insurers may take steps to refurbish their image as a partner in all difficult situations by introducing products with multiple options and coverage, app based entry and exit options and of course, realistic pricing.

The writer is former MD & CEO, Star Union Dai-ichi Life

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