Though the Coronavirus (Covid-19) pandemic has heightened the risk perception of customers thereby increasing the demand for insurance, it is upto the insurers how they capitalise on the opportunity and transform their business to cater to the ever-evolving needs of the customers, said panellists at the Business Standard BFSI Summit on Life Insurance.
“It is upto us what we do with this inflexion point. We should not waste a pandemic; innovation is key. If we rest on our laurels to say that as an industry we have come through this relatively unscathed, I think we would lose this opportunity,” said Vibha Padalkar, MD & CEO, HDFC Life Insurance.
Fundamentally, not a lot has changed but optically it might look like that a lot has changed, she said. “Innovation in the form of products, use of technology, partnering with insurtech firms, and servicing customers in vernacular languages are some of the things that the life insurance industry should look at,” she suggested.
Speaking on similar lines, Naveen Tahilyani, MD & CEO, TATA AIA Life Insurance, said, “The opportunity is there; the consumers are ready but the question is what are we going to do to respond to this opportunity. We can change our business model, simplify our products, make them more protection-oriented, use technology to give them a better experience, and focus on quality.”
“The industry has been very resilient, but we should now build on this platform of resilience and get into a transformation mode so that we can take our business model to the next level,” he said.
“There is a heightened perception of risk coverage in the customer base now. In the last 20 years, this is the first time that insurance hasn’t been so difficult to sell. There is a little bit of pull factor from the customer,” Tarun Chugh, MD & CEO, Bajaj Allianz Life Insurance said.
“The way we have been able to sell term plans and respond to the customers, it has not been an easy ride, given that the reinsurers have not been very helpful. It will be a big loss if we do not retain the learnings we have had and transform the industry further as we go ahead,” Chugh added.
The life insurance industry saw massive disruptions in the initial period of the pandemic. Subsequently, the demand for life insurance products went up multi-fold but the supply side constraints meant that the demand could not be fully capitalised upon by the insurers. Despite that, the industry managed to post decent growth in FY21. Just when the industry was coming out of the shadows, the second wave of Covid-19 struck, causing another bout of supply side challenges.
“The growth was muted during the initial period of Covid-19 and again during the second wave, we had challenges. But, if you look at the overall picture, I would say, this is one of the industries which has been resilient. Last year we grew by 12 per cent despite the disruption caused by the lockdown. This year, so far, we have grown by around 6 per cent. So, despite the pandemic, this kind of growth rate, I think, is good. On the whole, the industry has held itself exceedingly well,” said NS Kannan, MD & CEO, ICICI Prudential Life Insurance.
Raj Kumar, MD, Life Insurance Corporation of India (LIC) said that during the pandemic there were three challenges – customer acquisition, servicing, and claim settlement. But the industry rose to the occasion and new systems were put in place to address the issues.
“The pandemic has also given a push to the awareness around insurance. But there is a paradox. While customers want to be insured, they are facing economic stress,” Kumar said.
Demand has gone up, both for health and life insurance, and there is no doubt about it, said the chiefs of insurance companies.
“We see demand at 2x of what it was before Covid-19 struck. While the industry has done everything but it has been a difficult process. The good news is the demand is still there and the processes have become a lot more streamlined than before. The bigger problem is the consumer inertia and that has been shifted by Covid,” said Yashish Dahiya, Chairman & CEO, PB Fintech, the parent company of Policybazaar.com.
Speaking on the competition the industry will face from the new age insurtech companies, Padalkar said, these new age companies are not going to invest Rs 2,000 crore of capital, which is required to build a stable insurance business that will break-even in 12 years’ time. “Every old-world company in the financial services business is looking to partner (with insurtechs) rather than compete,” she said.
Echoing Padalkar’s view, Chugh said, the answer lies in partnering and solving for what we cannot solve as legacy companies. “Fintech’s understand the consumer space and they have the capability of responding fast and that is an area where we can partner,” he added.
“There are many areas where collaboration can happen with fintech and insurtech companies and we are looking into that,” said Raj Kumar of LIC. Not just collaboration between legacy companies and new age insurtech firms but there is scope for collaboration amongst the insurance companies themselves, Tahilyani said.
Kannan said, “The life insurers have capital, risk management capability, and investment capabilities. These skills will continue to be with us and the way to go is ‘partnerships’.” We should be encouraged to work even closer with the new age players by actually having a skin in the game. We should be allowed to set up subsidiaries, he added.
Weighing in on the subject, Dahiya believes, in the long-term value will not be added by just a pure tech or data play but through deep conviction in the sector.