The dynamics and landscape of life insurance sector have changed
dramatically with a series of regulatory changes in 2010 and 2013, especially
on the products and distribution side. Amid challenges, the macroeconomic
indicators look promising and India’s growth story is intact. Comparatively
higher GDP growth (although declining in recent past), very high savings rate
(mid-thirties), high proportion of financial savings (apart from real estate
and gold), demographic dividend from younger population are the encouraging
factors for life insurance sector to grow in future. We should look forward to tap
these opportunities.
Let’s judge the life insurance industry by the same yardsticks
of penetration of telecom. The telecom industry invested heavily over the last
one-and-a-half decade for setting up infrastructure. As a result, it was able
to increasethe density substantially and lower tariffs over a short span. Now,
it offers value-added services to its customers.
The telecom sector is also currently undergoing growth
challenges right now. Similar is the scenario in the life insurance industry as
ever since the private insurers started making inroads during early 2000,
Insurance Regulatory and Development Authority (IRDA) has brought in many
changes to ensure lowering of insurance cost and value addition.
However there exist some basic differences between the life
insurance and telecom industry. Unlike a mobile phone, a life insurance can
reap benefits only over a longer period. A life insurance cannot give you an
offer like a two month’s free 3G pack activated in four hours. Life insurance
is and will remain a long-term benefit and risk management plan. Value and
benefits of a service package for mobile phone is so current and visible. But,
an insurance plan will assist somebody in planning for retirement or children’s
education.
The dissimilarity don’t end there as interestingly, unlike in
case of a mobile service plan, the customer expects to get refund of the entire
premium amount when he or she cancels a life
insurance plans. But, it should not be looked at as an investment plan, but a
protection plan.
However the industry has lessons to learn from the telecom
revolution and the biggest lesson is that more you reach close to the customer,
the more you gain. It will be a win-win situation, when a life insurer gains
its customer’s trust by extending a helping hand in his or her distress. Hence
the life insurance industry needs to create a customer-centric network with
widely spread points of contact for transactions and financial literacy,
alongside its dependency on intermediary channels. Improved information
technology is always a boon.
But then what’s the level of our customers’ financial literacy.
Many other countries have framed regulations to encourage financial services
companies to invest in customers’ education by providing tax incentives.
Above all, like telecom, simplification of products and a better
distribution model for the rural population shall drive the growth. The
regulator is encouraging the products under micro-insurance regulations and
very recently launched the Common Service Centres (CSC) model. This could
provide access to over 130,000 centres. The ability to connect them to
insurance companies’ servers electronically and service policyholders is a tremendous
opportunity.
The IRDA (draft) guidelines on insurance marketing firms are
also out and can be expected to streamline the distribution channel with more
accountability. The idea to introduce a mechanism to redress grievances will
help in increasing sales.
Finally, in the era of instant gratification and customer
expectations, life
insurance industry needs to become ready to meet customer expectations.
Cost rationalization should improve returns to policyholders and make the value
proposition more attractive.
No comments:
Post a Comment