Pratibha and I attended the “India Insurance 2020” conference arranged by FICCI earlier this week and got to hear what was on the minds of the industry bigwigs.
The industry (particularly the life insurance segment) has grown very fast in the last 10 years. While initial growth came at a very fast pace, it has now slowed down somewhat and the industry will have to work harder to grow in the next decade.
My antenna picked up a few pain areas the industry is likely to come up against in the years to come, where the players will need good competitive intelligence.
One area of focus is to understand the customer and educate him on insurance in order to increase insurance penetration. Despite very high growth in the last 10 years, life insurance penetration stands at only around 4%. A not-so-high growth in the non-life segment has kept the penetration there to a measly 0.6%. This is significantly lower than many other countries. The key issue (to different extents in life and non life segments) here are that the customers don’t understand the products well and the companies don’t understand the customer well.
The other much talked-about pain point is channel productivity. Both life and non-life segments have armies of agents that deliver, on average very low sales. Companies want to and need to monitor channel productivity and benchmark their own against those of their competitors and the industry as a whole. While everyone needs to have this information, no-one wants to share their own data with the others. A little like compensation data, I guess, where everyone wants to know the others’ while keeping their own confidential.
Related to channel productivity is the need for research on distribution channels. The individual agent is the primary distribution channel for both life and non-life segments, though newer companies like Canara HSBC are experimenting with greater reliance on banc assurance. The disconnect between the perceptions of the industry players on the one hand and those of the agents and customers on the other stood out during the conference. While insurance companies grumbled about the high incidence of false claims, one of the agents complained about the difficulties he faced in getting legitimate claims of his clients processed. Going by the murmurs at the venue, this seemed to be a shared opinion of many agents present there. Going forward, industry players will really need to understand the issues of their agents to make them more productive.
Finally, most speakers discussed the need to reach out to the “bottom of the pyramid”. In fact, the conference had a whole session dedicated to discussing micro-insurance. Indeed, as with many other industries, once the urban and SEC A& B markets get saturated, the attention inevitably turns to the bottom of the pyramid, which as one speaker pointed out is not the same as the rural market but resides primarily in rural areas. Insurance companies don’t necessarily need to create new products, as one speaker pointed out. Most of them have almost too many policies in their stables, one or more of which will be suitable for the small ticket insurer. The first difficulty is in reaching the customers and educating them. A bigger challenge is in servicing those policies. Insurance companies need to develop processes and delivery mechanisms that are cost efficient even for small ticket transactions in remote areas. Many of them are looking to find solutions through mobile and internet technologies. Regulations will also play a very important part in the evolution of distribution and delivery models.
Bottom line is that I expect that individual insurance companies the industry as a whole will need to allot significant bandwidth on competitive intelligence in the coming years.