Life insurance: Looking back, looking ahead – Regulatory support leading to new possibilities

Published: December 26, 2018 12:45 AM

Product guidelines like similar minimum death benefit across all ages and differentiated pricing of protection products for those who use wearables are good steps.

INSURANCE, LIFE INSURANCE, insurance policyData analytics and insights curation using deep learning tools, automation, mobility and cloud computing will make processes seamless, faster and cost effective besides opening new opportunities for the life insurance sector.

By Pankaj Razdan

A double digit growth rate, scoring high on persistency as well as claims ratio, several positives in the draft regulations—the life insurance industry had a remarkable 2018. It has been heartening to witness that growth is back in the industry and is here to stay. Tailwinds of macro-economic sentiments, awareness leading to diversification of the savings portfolio and focus on the ‘protection’ segment provided a firm ground to the industry’s performance.

Protection remains the key

While, India’s life insurance penetration is comparable to Asian peers at 2.8% of GDP, however, the protection gap is alarmingly high at 92%. 2018 witnessed an increase in the percentage of mind-shift of people perceiving life insurance as one of the best safeguard against risk and not merely a savings instrument for future. It led to insurers focusing on unique need based plans to protect people’s lives, dreams and goals.

The industry expanded its protection solutions bouquet and in turn the share of protection in their business. With falling interest rates and people looking for wealth conservation, guaranteed life insurance solutions also gained prominence. Changes to the LTCG tax made ULIPs a compelling proposition yet again.

Regulatory support

Over time, the industry stabilized and geared for the big leap in 2018. The IRDAI draft proposal made collaboratively with the industry was aimed to suit customer’s needs and provide more benefits. Product guidelines like similar minimum death benefit across all ages, extending the revival period to five years, and differentiated pricing of protection products for customers who use wearables, rewarding them for healthier lifestyle were all positives.

Reaching out to more

The industry widened its reach by leveraging the open architecture model and strengthened its bancassurance network. Distribution channels like agency and online ensured better distribution and increased penetration, while the industry closely increased its persistency ratio. Introduction of Point of Sales and Insurance Marketing Firm by the regulator was an immense move towards increasing insurance penetration and deepening distribution. Permitting the sale of simple OTC products through simplified on-boarded agents aimed at enabling faster customer on-boarding, while removing complexity of insurance for the end customer. While 2018 was remarkable, where would the industry head in 2019?

Interest in life insurance to grow: The year 2019 will witness the industry making intensive efforts towards increasing awareness so that people purchase life insurance for the correct reasons and stay invested in it for a long time.

Product innovation to aid growth: The new draft regulations will allow life insurers to enter new segments and expand product portfolio to increase reach. Innovation on the products will make life insurance more attractive for customers. Continuing the trend, with higher risk taking ability and greater awareness of the need to tackle those risks, the demand for protection-oriented products will witness further increase.

Technology to be the game changer: Data analytics and insights curation using deep learning tools, automation, mobility and cloud computing will make processes seamless, faster and cost effective besides opening new opportunities for the life insurance sector. From product design to sales to claims servicing and innovation, technology will allow insurers to improve profitability while delivering increased customer satisfaction and world-class digital experience.

Omni-channel distribution: Multiple customer segments will engage with numerous distribution channels in a single purchase journey making it essential for life insurance companies to offer a flawless omni-channel experience. While the new-age customers or the millennials might prefer the handiness of an online purchase journey, a larger population of customers will still require the support of life insurance advisors. While, there will be those who will research online but prefer to buy offline.

Binding all these aspects together, customer service and engagement will remain the key differentiator. Simplifying products and the customer on-boarding process, focusing on protection products and staying customer-centric, will be factors which will act as success mantras for the industry.

The writer is MD & CEO, Aditya Birla Sun Life Insurance and deputy chief executive, Aditya Birla Capital

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