Life Insurance Sector Will Continue To Grow In Double Digits

Amid several changes in regulations and the rise of Insurtech start-ups in financial year 2022, there was noticeable upswing in awareness among the country’s expanding middle class and young population who are insurable, yet still not covered. The increased awareness about the importance of protection and retirement planning has had a positive effect on product development, too. Many innovative products were launched aimed towards various segments and cohorts.

However, the collective new business premium for the life insurance industry witnessed a 16.81 per cent year-on-year decline to Rs 22,847.65 crore for the month of February 2023. Even though, there is a minimal drop in the industry numbers in February 2023 as compared to January 2023, the private sector continues to grow month-on-month.

Traditional Plans And Group-Term Policies Witness A Surge

Owing to high interest rates, the life insurance sector has witnessed a remarkable surge in traditional business, especially guaranteed products last year. This has aided in better margins for the life insurance companies as they continue to meet customers’ expectations with their traditional participating and non-participating offerings. The industry witnessed an increase in demand of non-Ulip, high-ticket policies of over Rs 5 lakh in March 2023, as the new tax regime came into effect from April 1, 2023.

The sector also witnessed a hike in the group-term business, as its prices have moderated to pre-Covid level. This has been primarily because group insurance provides one-year protection as opposed to individual protection which has a much longer policy term.

Irdai: Focus On More Governance And Lesser Control

The Insurance Regulatory And Development Authority of India’s (Irdai’s) persistent efforts with respect to putting in place regulations around products, commissions and protection in the recent years have helped in increasing insurance penetration and driving growth.

The latest initiative, enhanced access and service excellence (EASE) has been brought to improve various insurance services which will provide the policyholders an easy access for purchasing, servicing, or receiving claims or lodging grievances, while maximising customer satisfaction.

The ‘use and file’ procedure also brought significant change of flexibility in the industry. All things considered, the steps taken by IRDAI are in alignment with its goal of infusing more flexibility and higher governance in the sector.

This has helped the insurance industry to mature significantly and continue to focus on increasing penetration through robust distribution across the country. Distribution channels, such as bancassurance enable life insurance companies to leverage customer data possessed by the bank.

Moreover, IRDAI’s decision to assign states to a specific life insurance company will further boost the penetration, as companies will be in a position to deploy concentrated strategies in order to gain market.

Managing Customer Expectations

For the insurance industry, there is a need to have a balance between human interaction and technology. No matter how much automation happens, human engagement with customers will always be critical, especially in a long-term benefit product like insurance which requires trust between the insurer and the insured. It helps to fulfil customer’s expectation of transparency and easily understandable policies that offer the coverage and protection they require.

Insurance companies will need to strike a balance between human interaction and technology so that customers still have a choice in how they interact with their insurers. One of the challenges that we need to address is to enable digital interactions for the agents to ease their workflows and ensure that agents find it convenient to do business, and also connect with digitally-savvy customers in a more direct manner, through channels of the customer’s choice.

Conclusion: Growing Awareness And Acceptance Among People

Insurance has witnessed growing awareness and acceptance among people. The financial year 2024 will be better year for the life insurance sector as we will see more innovation coming through product and process changes at the industry level. Moreover, the recent changes in the regulatory framework from Budget 2024 will benefit the in the industry in the coming year there is expected to be a surge in demand towards Ulip of less than Rs. 2.5 lakh and other traditional policies with premium uder Rs. 5 lakh.

The life insurance industry as a whole will continue to have significant digital intervention, and will come out with new product innovations. There will be higher awareness level, and a better customer experience through digitisation implemented from customer on-boarding to claim settlement. This would allow the industry to continue registering a double-digit growth for them, and hopefully achieve universal coverage by the year 2047.

The author is managing director and CEO, Aditya Birla Sun Life Insurance

(Disclaimer: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.)