Insurance and Sustainability

Sustainability is something, which every society has to think of. It is no more an academic subject and is being increasingly discussed across sectors by governments worldwide. This is particularly important for a growing economy like India, where the insurance penetration has remained extremely low.

Insurance in layman’s term means protection from financial loss and loss of life. Financial loss could be for several reasons – natural calamity notably so as it happened in Chennai recently. It led to loss of human lives as well as property. Insurance basically then becomes a way of managing risk against uncertain loss and proves to be a vital instrument of safety.

Post-liberalisation especially, India has been viewed as one of the top emerging markets thus opening opportunities for large insurance companies in the world to penetrate in the insurance market, which is untapped.

There are 54-top global insurance companies that are operating in India. But the pace of growth in the sector has been slow. The growth and expansion of the insurance sector is viable only when people understand the importance of insurance in their day-to-day life. Understanding the importance of insurance in day-to-day lives is not so easy. It is always said that the importance of insurance is realised only after a calamity strikes. But the fact of the matter is that it should be realised before the calamity.

It is important that one must be able to anticipate and forecast possible calamities and create a safety-net around oneself against such unforeseen events. When people’s understanding becomes better, the insurance penetration will go deeper.

It is time that insurance companies moved their focus from urban populace to educating and creating awareness about the benefits of insurance among the rural population. Insurance education helps a customer understand his needs and risks, the availability of an insurance product to address and manage his risks; importance of processing an insurance product and knowing about the do’s and dont’s before and after the purchase of insurance cover. Insurance education thus enables a customer to access the services of the insurance sector in an informed manner and to promote market efficiency and flow of proportioned information for orderly growth of the insurance industry. With more than two-thirds of the Indian population living in rural areas with zero information or access to insurance products, the industry has to go miles to reach the unreached population.

The Life Insurance industry has collected R138,657 crore First Year Premium in the financial year 2016 showing a growth of 22.55 per cent higher compared to the previous year and the General Insurance industry has also registered a growth of 13.8 per cent as compared to the previous year. Technology is disrupting many existing business models. Nobody thought that a situation will come so soon that we will all be moving from cash operating society to cashless society. The usage of technology in insurance, although it started a bit late, but going forward, I am sure this will definitely be one force to reckon with in insurance sector as well.

With rising number of mobile users; availability of cloud based technologies; social media interaction; and, insurance agents are finally realising the need to be more agile, efficient and accessible in order to serve today’s customer better. As a result insurance agents not only feel pressured to digitise their workflow but also must streamline their business processes to make the cost-of-doing business more efficient and in line with the regulation.

The sustainable growth in insurance sector is possible only when all the stakeholders have adopted new technologies. During last three years, the growth in online payment of premiums has been more than 100 per cent year-on-year. Moving forward, it needs to be 200 per cent for a majority of premiums collected online. The government has already announced an incentive for customers to make online payments—a reduction in premiums for both life and non-life policies by public sector undertakings. This needs to be promoted further to cover even the private sector. All the stakeholders—insurer, insured and the agent—stand to benefit.

In advanced economies like US, while most of the customers do individual research online to pick a product, nearly 40 per cent still contact the agents to close the sale. In India, although online channels are available, but people still go back to the agents asking for details. This needs to change. Insurance education and online presence prevents the possibility of mis-selling, as a result of which, sustainable growth in insurance is a nearterm possibility. The economic importance of insurance cannot be undermined and the share of insurance in the GDP is steadily rising. Its it time for a relook into customer behaviour and innovative products as per customer needs.

(The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of INCLUSION. Comments are welcome at info@skoch.in)