Shyamal Banerjee/Mint
Shyamal Banerjee/Mint

Expect more from insurance this year

Talking about overall distribution, 2014 will see the open architecture model in action

For the life insurance industry, 2013 was a year when the regulator and the industry took a series of positive measures that have far-reaching implications. For me, the high points were the Insurance and Regulatory Development Authority’s (Irda) approval of open architecture (and a quick follow-up by the Reserve Bank of India (RBI) in issuing the draft guidelines for bancassurance), and the launch of e-repositories. These measures showcase how this once fledgling industry is now matching international standards and getting organized at a rapid pace. In 2013, the life insurance industry took a big step forward in introducing innovative products in the online space—term plans with deferred payouts being the highlight, and, of course, reviving the pension’s category. In the new year, innovation in products and distribution will continue to be the key focus for insurers.

Talking about overall distribution, 2014 will see the open architecture model in action. The changes that Irda has contemplated were much needed. Apart from the obvious benefits of financial inclusion and reaching out to the vast population of the hitherto uninsured, I sincerely hope that banks quickly capitalize on the business potential of this model. I believe that banks, as insurance brokers, are ideally placed to reach out to customers with a wide array of product choices. This, in turn, will help increase the penetration. The regulator is also strongly encouraging insurers to leverage common service centres (CSCs)—the government sponsored CSCs, to enhance reach and penetration of insurance, particularly in the rural areas.

Insurers would also continue to leverage technology to deliver superior customer service and increase penetration levels in the country. In the past two years, this platform has already proved to be a game-changer for the life insurance industry in India. The online insurance industry today is at a nascent stage and is expected to grow significantly with the business coming from outside of the top 30 cities. I see more product innovations happening in this space, with the regulator’s new guidelines on web aggregators and the increasing internet penetration aiding this growth. Mobile commerce will grow to become an important platform to watch out for. Insurers will leverage this platform in a big way and reach out to customers. Technology, without doubt, will drive innovations in customer service.

Apart from open architecture, another effort from Irda to improve the infrastructure of the life insurance sector was through the launch of e-repositories, which will provide the facility to keep insurance policies in electronic form. The benefits of this will play out in 2014. E-repositories will not only offer insurers easier means to drive know-your-customer norms, but the companies will also be able to identify customers with specific insurance needs. Launch of e-repositories will also boost the online insurance space as it facilitates easy and fast transactions such as modifications and revisions for policy holders as well. Significantly, dematerialization of policies will help insurance companies improve service standards, including in terms of delivery of documents, managing policies, etc. It will also help in checking frauds and false claims.

Another segment that I hope insurers will focus on is launch of more pension products, on both traditional and market-linked platforms. Given the lack of a proper social security net in India, such schemes are much needed. While protection will continue to be the focus for the industry; the new year may also witness a revival in unit-linked insurance plans (Ulips). This product category has been the most affected since the industry went into a tail-spin in 2010. Once the general elections this year are over and with a stable government in place, the stock market is likely to rally. This will further benefit Ulips as a category. Like all other industries, insurance, too, feels the effects of internal as well as external changes. If a more robust online platform, mobile commerce, e-repositories, bancassurance and better distribution are some of the changes that are happening within the industry, then external changes, such as the passage of Insurance Bill, too, will have a big say in the way things take place in 2014.

The Bill has been pending with Parliament for five years. With multiple reports quoting figures in the range of $1.5-3 billion as the likely investment in the sector, the industry will gain much desired impetus from this. Increasing the limit of foreign direct investment (FDI) to 49% will enable local companies leverage on state-of-the-art technology and access better systems and processes that will ultimately lend to an overall superior customer experience.

While increased FDI may mean more foreign participation, 2013 saw the exit by a few global companies from India. To me, this implies that even though India offers an inherent opportunity for insurers (our insurance penetration currently stands at just 4%), we as an industry need to work harder to keep the business attractive for global investors.

It is my personal belief that the industry also needs to take the onus of helping consumers achieve their needs, which today include basic survival planning. We need to help clients determine the right amount of insurance to address their needs and objectives for the future. Given the recent Irda measures and the government’s support, I am confident that the insurance industry will achieve its objectives and I remain positive about the long-term prospects for the domestic life insurance industry. The new year one hopes, will witness the fledgeling insurance industry once again reclaim the growth path.

T.R. Ramachandran is chief executive officer and managing director, Aviva Life Insurance .