14 Jan 10 Innovate, Converge and Penetrate – Indian Insurance 2020

A couple of days back Varsha and I attended an Insurance summit in Mumbai, organised by FICCI, where the theme of the conference was Insurance 2020.  It was an interesting conference and I was glad to hear things repeated through the sessions that should stand the industry and the country in good stead – increase efficiencies in the distribution channel, minimize mis-selling, explore alternate distribution channels, improve channel productivity, innovate and of course, everybody’s favourite bottom-of-the-pyramid product,  micro-insurance!

There were some very pertinent issues discussed in the conference relating to the above, but what stood out, according to me was the discussion on convergence in financial services. The unanimous opinion in the conference and among the panellists was that convergence or in simpler terms, product bundling in financial services is here to stay.

Insurance and banking have come together very successfully in Europe and bancassurance is one of the fastest growing distribution channels in India as well – players like Canara HSBC in fact are committed to a pure bancassurance model;  There has been convergence between credit and insurance products (home loans with  a insurance cover on the side). Credit cards and insurance. Investment products and insurance – so whats the futuristic view?

Imagine one single relationship through which ALL your financial needs are done – you can transact, invest, loan, insure and save. Seems like a brilliant idea, and not surprisingly everyone present appeared to be in love with the vision that was presented – including yours truly. But when I was thinking about it on the way back to Pune, I realised this is exactly the kind of behaviour that got companies like Microsoft into trouble in the first place. Sure, you can argue that this is not the same case – the customer will be given a choice. But my argument is, at what point does the benefit of a seamless transaction exceed the cost of conducting a supplementary transaction – purely from a customer perspective.  Further, the “bundling” will always come at a price and the customer may not be aware that he could have other choices.

My concern with convergence is that customer angle may just get missed out and in our hurry to keep customer service at the centre of the solution, we may actually end up doing a dis-service!

There is such a thing as too much convergence and my guess is its not all good.

Pratibha Kurnool

Pratibha was part of the ValueNotes solutions team, creating and designing business proposals and business propositions.

  • Musings on Insurance industry’s CI needs
    Posted at 17:23h, 11 March Reply

    […] 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. […]

  • Rahul
    Posted at 07:35h, 25 January Reply

    From the perspective of the customer-Normally 95-97% people doinot understand fully the insurance products in market. Lot of decisions whether for a corporate insurance plan for the plant or an individual life insurance goes with numbers wherein IRR & PV values are shown on time chart scale & risk is broadly and very largely highlighted which the plan covers.
    Its because of the conservative nature that mostly timid personailty people go for more insurance due to emotional decision making.

    In reality insurance business works on probabilities. Getting the right equation is very difficult but the policy does more than benefits the insurance companies.
    The chance of insurance claims in 100 human lives is mere 1.5 to 2% i.e. 2 people claiming insurance. Avg policy value sold in 4% households in metro cities & tier II town is Rs.1 Lac only. With this its hardly few lakhs claimed while few crores of desopits available with the Insurance product managers without interest burden.

    Now thats smart earning. All said the insurance salesperson is a real talent in this country as its very difficult to sell retail life insurance and hit your numbers every week after week.

  • nivedita
    Posted at 18:32h, 21 January Reply

    I agree with Rekha here, the whole purpose of convergence of financial instrument/product is to provide customer convenience (apart from their own cross marketing strategy). The concept of bundling/convergence is very successful and proven in Consumer Goods sector.

    Also now the financial market in India has opened up so many options. In the future customers with good relationship with banks might as very only opt for a one shop stop to save time and confusion.

  • Rekha
    Posted at 10:01h, 14 January Reply

    The idea is valid. The discerning customers will always look for best deal, but there would always be people who would look for such bundled services, and ready to pay a premium for the same. At the same time, companies will find and develop ways to provide convergence at competitive rates. It thus seems that the convergence is there to come and stay!

    • Pratibha
      Posted at 11:42h, 19 January Reply

      Thanks Rekha – yes, I agree with you that companies will innovate and competition will ensure competitiveness. My only concern is that in the rush to get to the vision, real customer centricity “may” be compromised. I hope for the industry’s sake you are right and my apprehensions are dis-proved.

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