India is one of the fastest growing insurance markets in the world expected to be the sixth largest by 2032. According to a recent report ‘India’s insurance market: poised for rapid growth’ by Swiss Re, insurance premiums are expected to grow on an average at 14 per cent for the next decade. India with one of the highest populations in the world and a low life insurance penetration of 3.2 per cent offers a very high potential for growth in the life insurance sector. The demographics of the country are also favourable with a large portion of the population still young and rising income levels. Though inflation and global uncertainties would remain a challenge, the sector is expected to perform well with the support of digital enablement and regulatory reforms.
Pandemic has changed outlook towards insurance as a primary financial need. Many surveys conducted post the pandemic concluded that the Indian customers have started considering financial immunity and stability as a major factor in their financial planning, and consequently more are now aware of and open to discussing insurance.
The pandemic has also changed customer behaviour and has accelerated use of the digital with the increased penetration of the internet and smartphone usage in India. The Internet and Mobile Association of India estimates that India would have 900 million internet users by 2025. Furthermore, the estimated population that is engaged in online transactions is approximately 350 million which is higher that the population of many countries. A direct impact of the enhanced internet usage has been that customer behaviour and buying patterns have evolved to be more digital in ways unimagined. Internet usage and rise of smartphones have changed how customers are looking for products/services, making a buying decision and completing the purchase. The insurance industry has also adapted well to these requirements of the customer and this would continue to drive how the industry services the needs of its customers.
In addition, digitalisation has opened distribution avenues to the highly underinsured rural population which constitutes about 65 per cent of the total Indian population. An estimated 50 per cent of India’s online users are from the rural segments, reflecting digital’s huge potential to reach and service these customers. Thus, digital will determine the industry growth as well as structure in the coming years.
For example, over the last two years at Shriram Life Insurance, growth has been driven by technology-driven sales processes with a focus on ease of doing business that includes paperless proposals, eKYC for quick verification, and data-driven underwriting for faster processing. The same holds true for a majority of the other insurers as well.
Furthermore, customers today seem more aware of their needs and expect products that would cater to their specified needs. The traditional products though still valid, might not be able to appeal to the newer customers in their present form. Insurers would need to move from a product approach to a more solutions-driven approach focused on specific customer needs. Thus, the need to focus on developing customized products that appeal to different customer requirements.
Customization would require reaching customers with targeted messaging, need-based solutions offering and pricing at the right time. To be able to deliver, insurers would need to rely heavily on data, technology, partnerships and innovation. Customer engagement would be critical – the ability to proactively understand the customers’ requirements and needs and fulfill them. With the adoption of AI (driven by strong analytics) the opportunities available for enhanced customer engagement are limitless.
In addition, insurers would look to strengthen the offered customer experience with improved processes especially in relation to claims settlement and underwriting with the help of technology. At Shriram Life Insurance, we are now able to settle non-early death claims within 12 hours even for the remotest of rural locations.
In addition, the regulator is also pushing for faster growth in the industry. A series of regulatory changes also bring out an opportunity for the sector to grow, especially the ones focused on improving insurance penetration, increased capital inflow, simplified product regulations, etc. The regulator has also suggested amendments to the existing regulatory sandbox that could foster further innovation in the sector.
Out of all the major challenges that the sector faces and might continue to face, inflation, would be one of the critical ones as customers might tighten spending as well as savings. This enhances customer engagement and ensures customized and flexible solutions.
Though customers are becoming digital oriented and now prefer to complete policy processes digitally, the traditional models continue to remain valid. Around 80 per cent digitally savvy customers also prefer a face-to face conversation with a sales person before making the buying decision. Thus, resource constraints would continue to be a challenge. However, this would not be limited to the salesforce. Even the continuous upskilling of support functions especially with regards to digital would continue to be a key factor to finetune service delivery in this space.
Views expressed by Casparus J H Kromhout, Managing Director & Chief Executive Officer, Shriram Life Insurance.