Digitization, new perspective towards protection to define insurance in ’213 min read . Updated: 08 Jan 2021, 07:02 AM IST
Protection will remain in focus as the pandemic has put our mortality into perspective
There’s no denying that on some fronts, the covid-19 crisis has transformed some business processes and prospects for the better. A shift in perspective, a move towards adding value to the society and, of course, rapid and much-needed digitization. All of these value-accreting effects have also been seen in the insurance industry. Here’s how the “covid moment" could shape up the industry in 2021.
Rapid and extensive digitization
Accelerated pandemic-induced digitization has prompted insurance agents to move their pitches from face-to-face interactions to virtual meets. The numbers are surprising: 58% of the agents surveyed by the Boston Consulting Group are managing renewals virtually post covid, while 63% of them initiated virtual customer outreach through video calling or similar means.
Clearly, insurance distribution is now significantly digital and customers, across demographics, including senior citizens, are adapting to digital solutions. Digital influence for urban insurance customers is expected to reach 40-45% once we move ahead of the pandemic, and over 60% of digitally savvy urban consumers have already shown their willingness to buy insurance products online, according to BCG data.
Digital service touch points in the insurance industry have also proven to be massively useful for customers during the pandemic. Some companies led this shift, while others followed to ensure the digital customers’ experience with life insurance was on a par with other industries. Digital touch points like WhatsApp, chatbots, customer service apps and more recently the innovation to ensure the industry moved to screen-to-screen meetings rather than face-to-face meetings have become the go-to service features for customers and the industry alike.
Massive shift in product preferences
I’ve seen how pre-covid, unit-linked insurance plans (Ulips) were extremely popular among consumers shopping for insurance products. The BCG survey I referred to earlier reveals that between FY18 and FY19, the share of unit-linked products in the total premiums jumped from 14% to 15%. Had the covid-19 crisis not manifested, this trend may have continued unabated for a few more years.
However, when the markets dipped at the beginning of the pandemic-induced lockdown, Ulips reflected a downtrend. Simultaneously, there was a massive shift in consumer preference, with many people gravitating towards protection and guaranteed plans instead.
Clearly, protection will continue to remain the main focus for customers because the pandemic has put our mortality into perspective. The industry can leverage this momentum to make many more customers aware on the benefits and need of life insurance.
Assessing insurance penetration
Despite the many roadblocks triggered by the pandemic-induced lockdown, the Indian insurance industry continued to function unrestricted. Fortunately, the Insurance Regulatory and Development Authority of India (Irdai) ensured that the industry remained equipped to tackle rising consumer needs during this crisis. In fact, the industry has been consistently growing during all the phases of the lockdown. Given this and other progressive measures like the regulatory sandbox, the time is ripe for the industry to revisit how insurance penetration is computed.
Currently, insurance penetration in India is only 3.7% of the GDP as against the world average of 6.31%. But this number may not represent the true picture because presently, we measure penetration as the percentage of premium to the country’s GDP. Given how premiums for protection plans are quite low, a better way to measure insurance penetration would perhaps be to compute it as the percentage of sum assured to the country’s GDP. If this comes to pass, the way we measure under-penetration of insurance could change noticeably in the coming years.
It took a pandemic for the Indian life insurance industry to make some shifts, but the way ahead seems full of hope. It will be interesting to watch how increased digitization, greater preference for protection products, and possible regulatory changes come together to give the sector a massive boost.
Tarun Chugh is managing director and chief executive officer, Bajaj Allianz Life Insurance