Industries around the world are grappling with uncertainty because of Covid-19. With the global economy expected to shrink by 3 per cent, the new normal is characterised by risk and unpredictability. In such doom and gloom, insurance companies are faced with challenges such as ensuring employee safety, contact-less claim settlement, premium renewal, and pricing of Covid-19 policies.
Like most industries, even the insurance industry responded with resilience and readiness to weather the storm by accelerating digital transformation. The industry is shifting rapidly from its traditional DNA of one-on-one communication with clients towards the adoption of ‘insurtech,’ technology-assisted insurance services, by incorporating tele-medical tests, video-based claim surveys, and digital claim settlements.
Tectonic shift in customer orientation
Traditionally, life insurance was predominately bought for the purpose of savings. However, due to job loss, planning to save has taken a back-seat. This has led to the change in product hierarchy and increased the sales of low-ticket policies, such as term and protection plans which account for 50 per cent of the overall business.
The role of non-participating insurance plans should also increase as they are easy to explain and thus easy to sell during this period of high market volatility. Many insurance companies have proposed IRDAI to enable initiatives such as EMI based premium payment and index-linked guarantee plans to provide relief during the pandemic.
Health insurance holds more value now
It is a bitter truth that death makes people more aware of the importance of their lives. In India, only 14 –16 per cent of people currently own health insurance. However, owing to the current situation, consumer behaviour is changing. Earlier, health insurance was considered as a discretionary expenditure, but now, it has become a primary need.
The inquiries for health insurance policies have risen by 40 per cent, indicating an increase in health awareness among people, say media reports. These evolving needs create an opportunity for insurance providers to cater to a more informed customer. Keeping this in mind, home care services have been launched by various health insurance providers to cover the expenses of Covid-19 treatment. The online insurance brand aggregator, Policybazaar.com, has started sending self-medical check-up kits to speed up the end-to-end delivery of insurance.
Making adjustments
According to a recent PwC report, the general insurance sector is expected to have a total claims pay-out of $107 billion in 2020, making this pandemic a global insurance event. The struggling automobile sector and pay cuts in jobs have resulted in a slump in new vehicle purchases, which has further affected premiums collected by motor insurance companies.
The only glimmer of hope is the short-term profit earned by insurance companies due to the reduced number of vehicles on the road, resulting in fewer accidents and limited claims on existing policies. To grab the opportunity amidst Covid-19, ICICI Lombard introduced a pay-as-you-use insurance plan which adjusts the premium depending on the usage of the vehicle.
Future of insurance
Change is the only constant and innovation is the only way to win. The great engine of change — technology — will be the future driving force of this industry. Processes like machine learning and artificial intelligence will play a vital role in automating claim settlements and policy renewals.
On the organisational front, flexible working hours and work from home culture will promote gender diversity in the workforce. Digital infrastructure will create a flatter organisational structure by enabling one person to reach many people. The spending capacity and liquidity will be affected, making affordable low-ticket policies a need of the hour. The importance of co-creation and customisation facilities for designing personalised policies will be paramount. To rise above all odds, the insurance industry should focus on product process innovation and the three drivers of future growth — affordability, accessibility, and simplicity.
(Yogesh Bansal and Shubhangi Srivastava are students of the PGDM at Great Lakes Institute of Management, Gurgaon.)