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India has approximately 500 million internet users (Photo: iStock)
India has approximately 500 million internet users (Photo: iStock)

Opinion | Insurance needs a digital model that works both for agents, consumers

Digital agent model will help address under-penetration due to lack of supply across markets

According to a recent report by the Internet and Mobile Association of India (IAMAI), India has approximately 500 million internet users. Of this, hardly 50 million are active online shoppers. For complex categories such as insurance, which is advice-based and where products are “sold" rather than “bought", this number is even smaller.

A broad-based outlook of the Indian insurance sector reveals two fundamental trends. First, the traditional prominence of insurance agents, who play the vital role of handholding consumers throughout their policy life-cycle. Second, the all-pervading impact of digitalization as a market force that is reshaping how consumers engage with the sector and their insurance policies.

How do these trends intersect, and what does it mean for the sector? Catalyzed by the booming internet and mobile penetration, people across markets and product categories are constantly looking to digitalize how they consume. In response, industries are aggressively investing in creating easier, more intuitive digital experiences for consumers.

Yet, the insurance sector is largely defined by the traditional agency system, which recruits, trains and deploys agents across the length and breadth of the country to sell insurance products, for which they earn a commission.

This system has defined insurance in India for decades, even after the sector’s privatization in 2001, and even now when 4G speeds and smartphone access are status quo. In our country where insurance policy is sold and not bought, consumers prefer to have a trusted agent to guide them in aspects like selection of the right insurance provider and the relevant product. The agent is relied upon to navigate them through a plethora of products that have been created to meet diverse needs, and during the time of claim settlement, where consumers need immediate access to experts for real-time guidance.

Clearly, the agent model is one that India prefers, and it will sustain because it is what tier-II and tier-III consumers, who comprise the largest chunk of future demand, expect. What the sector can do in its intent to go digital is to empower and arm the agents with the tool and capabilities, while ensuring the benefits of digitalization reach the end-consumer. Digitalization will also result in employment opportunities and jobs for agents who are new to the category.

Many consumer benefits are immediately clear when we consider giving insurance agents a digital edge. Using algorithm-powered enterprise apps, agents can handpick, through hundreds of choices, the one option that is best suited to a consumer’s needs. The entire process, from browsing for the best options to purchasing insurance, and the consumer journey gets expedited through technology.

A completely consumer-centric model helps in ease of access to insurance products with reliance on a trusted, and now digitally equipped agent. Agility, ease and transparency of product selection fortifies consumer trust in their insurance agents, and the proposition of buying insurance overall. With a digital layer, insurance becomes as easy to understand and buy as any other product in the market, creating a pro-choice sentiment. For the agent, it means more earnings and being able to serve customers better. The ability of PoS (point of sale) insurance agents to sell products across companies frees the sector’s traditional reliance on branches (note, a regular insurance agent is allowed to sell policies of only one life, one health and one general insurer. Unlike a PoS agent, he cannot on-board multiple insurance companies under the same licence). The emergence of this branchless model has paved the way to further reach to remote localities, while reducing the cost of business. This digital PoS agent model will help address under-penetration due to lack of supply across most markets and segments, by reaching 500 million middle-income Indians who may or may not be online or can afford insurance but have no one to service them.

Therefore, it is time for the sector to truly go digital and tap the win-win proposition of a digital-enabled model that works in favour of both agents and consumers.

Balachander Sekhar is chief executive officer,

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