By Tushar Chatterjee
Insurers are sometimes referred to as “Players”. So, there are 24 players in the life insurance sector and 40-odd players in the non-life sector. However, it is not as if these entities are taking part in some competition and their primary objective is to win. The insurance industry is not a space to be so playful. This is a social service-oriented industry where the worth of an insurer is not measured by the bottom line alone.
Here, what matters more are claim settlement, persistency and solvency. If these are properly taken care of, profit will come one day. The maturity of the industry is judged by insurance penetration ratio and insurance density. These days, the protection gap of an economy is also measured to assess the effectiveness of the life insurance industry. In the life insurance industry, it may take 10 to 12 years to break-even and valuation surplus can flow in only after that.
Life insurance industry is an industry where the contract between the insurer and insured is for a long period; say, 25 or 30 years. In a whole life policy, the contract continues up to life assured attaining the age of 99 years. The person who purchased a policy at the age of 30 years is not the same person when he is 55 or 70. At the age of 30, the young customer is afraid of dying early. At 60, he is afraid of living too long in case he has not saved enough for the golden age. At 80, he may have no one to take care of him.
Are insurers aware of the changing financial needs which can possibly be addressed by another life insurance policy? Role of life insurers is changing everywhere. Today, life insurers are expected to improve the customer’s quality of life.
What does a man need as he grows up? He needs a trusted friend to suggest how to manage risks that come at various life stages. Life insurers have to play that role. If life assured is alive for a long time with good health, both the insurer and the insured get benefited. It is not enough to win a customer. The insurer that stays with the customers as a trusted partner, is the real winner. It is more important to remain a partner of the customer in her life journey up to the age of 65 or even beyond.
At the young age of 25 or 30, the customer may be encouraged to visit health clubs and adopt a healthy lifestyle.There can be rewards for switching over to a healthier lifestyle in the form of reduced premium or removal of health extra. Consultations with dieticians can be arranged at periodical intervals, so that the assured develops the habit of eating healthy food. Wearables can help the insurer monitor the health parameters of the assured on a continuous basis. The customer can be enrolled into parenting sessions as these are useful life skills. Later, he can be advised to buy an insurance policy that can take care of future educational expenses of children. For all this to happen, the insurers can partner with various service providers like fitness clubs, dieticians, edtch institutions, etc.
If the insurer can become a partner instead of just a player, it can acquire the Customer Lifetime Value in course of time. It never happens by chance. The insurer has to be in touch with the customers, with or without the help of technology. But, new digital tools like Ecosystem and Application Programming Interfaces (API) are creating new partnerships everywhere. Both insurers and insurance customers stand to gain from these digital applications.
The writer is an insurance industry analyst