BW Businessworld Life Insurance Summit 2017 | 'Digital Adaptation Tremendously Reduces Insurance Servicing Costs'
E-insurance, which keeps insurance records through repositories, is expected to drive digital penetration of insurance products
Photo Credit : Subhabrata Das
With just 3.5 per cent insurance penetration, there is a huge potential for the insurance industry and to drive that penetration digital distribution among others is one of the big way forwards. Insurance companies can reduce their business-acquisition costs by nearly 80-90 percent, according to a panelists, discussing the Future of Life Insurance Distribution Business at the BW Businessworld Life Insurance Summit 2017.
For their part, though, insurance companies are looking at reducing friction in the business of insurance. Manik Nangia, Director Marketing and Chief Digital Officer, Max Life: "We have to reduce friction in the process. We can differentiate from the digital and physical world. So I feel it's not the fear of disruption but opportunities of success. It is a different ball game in running an insurance business. The narrative today is that how do startups merge with banks and insurance agencies to address more consumers. At Max Life we work with 2 dozen startups daily inclusive of small and medium startups. Hence we have seen direct business are now contributing in significant amounts giving a boost to direct insurance."
If direct business is the way forward, digital is being increasingly seen as a way to bridge the gap between many new customers. Said S V Ramanan, CEO, CAMS Insurance Repository. "IRDA has come up with unique guidelines, which is not there anywhere in the world is the insurance repository guidelines. Largely insurance is still paper-based. But insurance repository keeps the records. It reduces the cost of servicing an insurance policy from Rs 1,000 per policy per year to nearly one-tenth the cost."
Digital distribution also enables customers to buy insurance on their own thus reducing the need to tele-selling or pushing the products through insurance agents. Mahavir Chopra, Director and Head - Health, Life and Strategic Initiatives, Coverfox said: "The way we look at a digital today is that where a customer can do it on his own, that is what digital is for us. We would like a customer to buy on his own. Today, processes can be simplified. It must be un-assisted sale is that the customer must come on his, and choose a product on his own."
Digital selling would also mean making the right sales. Alok Bhatnagar, CEO & Principal Officer, Easy Policy said: "Only thing that matters is the moment of truth, in times of emergencies the right policy can serve as the most useful product taking health matters into consideration. At EasyPolicy since the last 5 years, not even a single miss selling has taken place from our side and whoever we have groomed in our company has been doing very well in sales."
Although digital will not eliminate the direct human interface which is crucial for insurance selling. Parekh, Principal, Blume Ventures noted: "I do believe that for more complex sale you need assistance. When you want to work with carriers, it may not be that easy. In China, one of the biggest insurance companies with 15 percent market share uses agents and distributors in their own staff. Even with so much internet penetration, they are still using offline sales."
Nangia, however, notes that digital helps to reduce tremendous paperwork and provides better service to the customer. Said Nangia: "We can ask people to fill an eighty field digital form or we can deduce it from his digital footprint. It helps us communicate and engage better so it keeps them on our books. It helps us value that this kind of people value this information, which finally helps grow faster. Digital technologies play a role. The dominant seller may still be humans, but the technology will enable this distributor to give better service."
In the end, going digital in the distribution business can also improve persistency ratios and increase repeat business. E-insurance has shown that e-insurance increases the persistency ratio. Said Ramanan: "we have seen that people who chose e-insurance, there is a persistency ratio of 97 per cent."