by Anshuman Verma
The Indian insurance industry is evolving. In terms of products, reforms, innovations and disruptions. This is reflected in the recent statistics. Data shows that overall insurance penetration (premiums as a percent of GDP) increased to 3.49 percent in 2017 from 2.71 percent in 2001 while the overall insurance density (premiums as a percent of total population) improved to USD 59.7 from USD 11.5 in the same period.
A lot of factors like the demand for innovative products, digitization-led disruptions, more awareness, newer channels for targeting micro insurance segments, capital infusion through public issues and FDI, and encouragement from the government are making the environment conducive. To make the most of this rapidly evolving ecosystem, insurers are constantly re-inventing themselves. Here are the key considerations.
Dwindling Domestic Savings Rate in India
inSavings rate in India has dwindled over the past decade. Credits: CEIC DataThe Indian Gross Savings rate (as a percent of GDP) has fallen almost 700 basis points in the last decade. Diminishing tax benefits could also be a key reason behind the plummeting savings rate. At the same time, one cannot ignore the fact that consumer behaviour is evolving. Every generation has a different perspective towards savings and investing.
If yesteryears were about investing and active saving, an increasing number of youngsters today believe in ‘owning less’ and ‘living in the present’. This shift towards instant consumption is driving several boardroom decisions, and businesses selling capital goods are feeling the heat. The insurance industry is no different. Luckily, there are ways to reinvent ourselves, and digitization is leading the way!
The Rise and Rise of Digitisation
Digitisation is everywhere. Everybody talks about it, and it is what keeps us on our toes. It enables us to serve our customers better, to learn about their preferences, and to make better products. For instance, measures like eKYC help us cut time and costs and allow us to onboard a customer in no time, while enhancing security and reach. Availability of data further opens several possibilities for underwriting and claim processing, thereby significantly improving the customer experience while reducing operational costs.
Digitisation is significant also because it influences various aspects of life. Multiple flexible and wearable devices, home-automation technologies, and telematics are some of the many practical use-cases. Wearable electronic devices, for instance, allow the consumer to monitor their health and take timely and informed preventive decisions, thereby lowering healthcare risks. Recently, Microsoft Corporation used its AI, on data from the Apollo group of hospitals, to create India’s first customised scale that can predict cardiovascular risks – this is a significant development that can help thwart challenges stemming from over nutrition and the LSD explosion.
Wearable sensor technology that sends automatic alerts may help people quit smoking, motion sensors that accurately predict and prevent falls for older adults, and devices that detect stress levels from sweat, are some of the newer applications that we come across. Interestingly, several consumers are willing to share this data (anonymously) to help insurers analyse and underwrite emerging health risks. Of course, this means that underwriters need to constantly evolve, using the higher disclosures and tons of data coming from online buyers.
Prudent Government Measures
In recent years, the Government has been one of the biggest catalysts in strengthening India’s insurance sector. Decisive measures like Pradhan Mantri Jeevan Jyoti Bima Yojana, Rashtriya Swasthya Bima Yojana, Ayushman Bharat, etc., are playing a vital role in creating awareness and driving insurance penetration pan-India. This means more data, about first-time users. A gold-mine for data scientists!
There is no doubt that insurers need to embrace the data-led change. They need to respond by offering solutions that are intuitive and mobile based. This will be the key to increasing online penetration through mobile.
The future of insurance in India looks exciting as the Industry is pegged to touch USD 280 billion by 2020. There is immense potential for all types of insurance products across channels. For the insurers and the regulator, the key is to evolve with the changing times and respond quickly. The Indian insurance industry is changing fast and insurers will need a lot of running to just maintain status-quo. Companies that can invest in the right places, remain agile, and develop a data mindset will have an edge.
Anshuman Verma is the Chief Marketing & Digital Officer of DHFL Pramerica Life Insurance.