Home >Companies >People >‘In terms of claims, we have completely gone digital’

Life insurance conventionally has been a push product. In other words, it needs a strong distribution network to meet customers and sell products, but as India saw one of the longest lockdowns due to covid-19, distribution came under a lot of pressure. The industry saw a drop in sales—first year premium sales in the fourth quarter of FY20 saw negative growth of 11.6% compared to the year-ago. However, intermittent lockdowns and physical distancing norms are here to say. Mahesh Kumar Sharma, managing director and chief executive officer, SBI Life Insurance Co. Ltd, takes Mint through the important aspects of life insurance, such as distribution, products and underwriting, which will have to be re-imagined. Edited excerpts from an interview:

What are the challenges post-covid-19, and how have you responded to these challenges?

India went into lockdown towards end of March. This was a very important time for the life insurance industry as insurers clock-in maximum sale during this time, when people rush to make tax-saving investments. So, we lost 14-15 days in March. April was mediocre because the first half went into figuring out how to react to the new normal. What helped the industry was that the digital backbone existed, but there was still disruption as call centres couldn’t operate and premium cheques couldn’t be deposited. But we got into the act quickly and, thanks to digital payment platforms like the UPI (Unified Payments Interface), we moved our customers to transferring money digitally. First-year premium collection was the biggest casualty during this time.

When do you expect to bounce back?

Compared to March and April, subsequent months have been better, but we don’t know how long it will take for things to stabilize. I would imagine it would take the industry till December to be where we were last December. Also, now we are proactively adjusting to the new normal as it has become much easier to do things digitally. For example, we put in place an alternative sales process that’s purely digital. This platform didn’t exist till March, although it exited in pieces as we had tools to on-board people. Then there is digital platform for payments, but post-lockdown these pieces came together to create a digital channel of distribution.

Clearly insurance distribution is being re-imagined. Do you think this will lead to scaling down of traditional distribution channels, which would lead to reduced costs for insurers?

Traditional channels are definitely being challenged, but I will not write it off completely, because we still have a huge rural population. In small cities it still takes personal connect for people to buy life insurance policies. So, instead of digital killing traditional distribution channels, I see digital complementing traditional channels by making them cost-effective, too.

Having said this, digital distribution will grow at a much faster pace. The initial expense on digital is huge, but running cost is very low. The best thing is that it can be scaled. Look at the banking sector for instance, the volume of transaction they are handling now was unimaginable in 2005 without core banking solutions. The exact same thing will happen to the insurance industry as there is more willingness to offer customized solutions with the help of big data and artificial intelligence. Operating in the digital ecosystem means lowering costs and companies that don’t lower cost will get priced out.

A few years ago, when pure-term plans were gaining traction online, insurers said it was easier to sell products like term plans, but investments and savings products will need to be explained in detail. Now, will we see product transformation, too?

Products like term plans, guaranteed plans and even return of premium term plans lend themselves to online sale because the benefits are easy to understand. But when it comes to products like, say, a unit-linked insurance plan (Ulip), you need an intermediary to handhold the customers through the risks. Otherwise customers can buy without being fully aware of the details, and that may lead to bitter experience later, impacting our persistency. So, from our side, these products are not ripe for digital-only sale yet, but as awareness increases and we have better artificial intelligence to explain products through audio visuals and chat bots, they can be sold online, too, subject to regulatory approvals. But product transformation will happen because protection is the flavour of the season, and you will see huge customization in this space.

Two other important aspects of life insurance are claims processing and underwriting. How have you seen these evolve? Insurers for instance, have started asking questions to assess if the policyholder is infected with covid-19.

The idea is to get the full medical history of the policyholder, because that helps the underwriter to underwrite the correct risk at the correct price. So, for instance, when it is known that the person is suffering from, say, covid-19 or any known illness, then usually, as per the life insurance norms, the case is deferred. The customer can re-approach the insurer for a fresh evaluation upon recovery. However, for an existing customer let’s be very clear, once we have accepted the risk we will honour claims.

Now, in terms of underwriting in general, given the constraints physical medical check-ups may not be wise, so we have moved to tele-medical underwriting or video underwriting. Of course, there is a risk of fraud here, but that’s something we will have to see.

In terms of claims, we have completely gone digital. What necessitated this was the fact that during the lockdown claims handling came under pressure. And, this is one area that has to work smoothly. So, customers can now get their claims processed by uploading documents, and our staff has access to servers even when they are working from home. We have opened about 80% of our branches and the presence of workforce is as per the local guidelines.

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