As the country's demography is changing fast, life insurance companies must take inputs from young people in designing customised products for them.
So far as providing life insurance cover to more people is concerned, the performance of the industry has been disappointing as it appears from the IRDAI data released recently regarding the performance of the industry for the year 2018-19. The growth of new business premium (NBP) has been mere 10.73%. LIC is responsible for pulling down the industry average as the state-behemoth achieved only 5.68% growth in the NBP income for the whole year.
The reason is not far to trace. The growth in number of policies sold is just 1.7% and the industry has narrowly escaped a negative scenario in this regard. Sometimes I wonder why the untapped potentiality has been eluding the insurers. Unless and until life insurers together achieve 15-20% growth in sale of policies “providing insurance cover to all” will remain an elusive target.
With introduction of so much of technology, there is a need to reach out to a large number of people. Insurers are deciding on business strategies without the consumer involvement. Every year, LIC selling more and more single premium policies is nothing but chasing a mirage. They want to accomplish success through this route but when the year ends they find the success drifting away from them. The growth of total premium of the industry has been just 10.73% and LIC’s market share in regular premium business dwindled down to 40%.
The 21st century life insurance market is not unidimensional. Involvement of the consumer in the marketing and service delivery systems is unavoidable. The demography is changing fast and as the prime minister says the challenge for every industry is to satisfy the aspirational generation. Thinking that technology and the online selling platform would attract more and more young people to buy life insurance from the comfort of their home is causing myopia to the business strategists of the insurance companies.
There is no mutually beneficial connect between the insurers and the potential customers. While discussing the role of consumers in their book The Future of Competition Prahalad and Ramaswami argue that consumer roles are changing. They have said that earlier market was transaction oriented, then it became relationship oriented but the latest trend is to invite the consumers and take their opinion regarding product development and market communications. I think the life insurers are stuck at the first and second stage of marketing. They must bring innovation in developing products and add imagination in distribution of their products to the millenials of new India.
Life insurance is not merely for financial goals as most of the companies communicate with the market while advertising. The essential difference between life insurance and the mutual fund is that while the latter is driven by reason, the former is propelled by emotions. The decision to buy insurance is greatly influenced by emotional factors.
Life insurance is important for peace of mind. But between the consumer and the seller, in respect of this kind of product, technology can’t be a motivator; technology can be a facilitator. Strangely, sellers of insurance have started believing that technology will give them business.
Shrinking LIC’s market share
Shrinking of LIC’s market share may not be a bad news for the industry; but slowing down of growth rate of LIC’s new business both of policies and premium is definitely an alarming news. So long the private sector insurers were growing well but LIC had been growing at a much faster rate, neutralizing the impact of the private insurers on market share. But lately LIC’s growth rate has suffered a setback.
LIC’s strategy to focus on single premium product during last few years has eroded its hold on the market; resulting in slowing down in sales of the traditional and the regular mode products. So long when more and more companies offered the same product people decided to buy the policies from the company having strongest brand reputation. But the ability to reform is the need of the hour because the consumer profile is fast changing in our country.
For the insurance industry to succeed in India it is necessary that LIC succeeds; and for LIC to succeed it is necessary for the current generation of executives to recognise that the business landscapes keep changing and competition keeps unfolding many challenges.
(The writer is former MD & CEO, Star Union Dai-ichi Life Insurance)