BackTouching new milestones in the life insurance industry
Life insurance serves two basic needsthat of suraksha (insurance) and bachat (savings)
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The year 2015 was an interesting one for life insurance. Earlier on in the year, the Insurance Laws (Amendment) Bill, 2015, was passed which has positively affected the business landscape. The implementation of Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), which was launched in May, popularised the concept of protection. In a short span of time, over 25 million lives have been covered through this scheme.
The coming year holds a lot of promise as it will see the implementation of efforts that have been initiated in 2015. The relaxation of foreign direct investment (FDI) limits augurs well for entities who have ambitions of scaling up operations.
Penetration of life insurance in India needs to increase. Insurance companies collectively need to address this challenge, and technology could be a game changer in this aspect.
We are getting closer to 2020, the milestone where the population is expected to have a majority of young working individuals. And this population will need financial security. The level of financial awareness is increasing, credit for which goes to the insurance regulator, the government and the financial services industry. What’s required now is sustaining the momentum that these initiatives have gained.
Life insurance serves two basic needs—that of suraksha (insurance) and bachat (savings). Therefore, products need to be simple and easy to understand. This will pave the way for life insurance to become a pull product. There is a need to do this because a closer look at the savings and investment patterns reveals that the quantum of protection in the financial portfolio has to be more.
Developing products that are simple and equally easy to purchase will enable a larger section of the society to build a robust financial plan. Success of the PMJJBY scheme has shown the game changing power of simplicity. The biggest innovation that the industry can do is to simplify products, processes and terminology.
Technology has been a catalyst for change, and will continue to be so. It has nudged the industry to stay on the profitable growth path. The life insurance industry is capital-intensive and the relaxation of FDI norms will attract long-term monies, which can be deployed to scale up operations, build distribution channels and deliver superior service to customers. Effectively, all of this will aid in bringing in a large section of the population into the ambit of life insurance.
Multiple distribution channels offer customers options to choose the way in which they prefer to interact with insurers. Distributors are empowered through technology-based sales platforms. Our vision of life insurance is that of a product which a layperson understands as easily as she understands and purchases a fixed deposit. While the digital platform has changed the way life insurance is sold, it is still work in progress.
The insurance regulator always places the customer first, and in line with that thought, changes have been effected to product and distribution structures. The regulator will continue with its customer centric approach and encourage insurers to innovate in terms of products and distribution. Dematerialisation of policies—introduced for the first time in life insurance—will gain traction, thereby enabling every individual policyholder to have an electronic presence through an electronic insurance account.
Year 2015 has seen the private life insurance industry complete 15 years of learning and innovations. As we gear up for the second half of the decade, we have a lot of exciting times in store. The current macro-economic environment is more conducive than it was a few years ago. The population of the country is now more inclined towards financial savings instruments, which bodes well for the financial products.
Effects of the economic development that has taken place over the past year-and-a-half will reflect in the coming years, and this is a great opportunity for entities to utilise.
The 7th Pay Commission has given an upward push to the incomes of a sizeable section of the population. With an increase in income come aspirations for a better lifestyle and the need to secure the future of one’s self and family. In such a scenario, life insurance is set to become a preferred product for every working individual with responsibilities.
Sandeep Bakhshi is MD & CEO, ICICI Prudential Life Insurance Company Ltd.
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