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Can Small-Sized Insurance Plans Potentially Change The Insurance Landscape In India?
For a generation that makes up 45% of the Indian workforce and previously stood by the maxim of living life as it comes, these times could act as a catalyst in increasing adoption rates for small-sized, customer-centric insurance offerings.
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Different industries, economies, and societies around the world have faced some of the most unprecedented economic and psychological shocks in the past few months. While this is a challenging time for all, the insurance industry in India finds itself in a particularly challenging situation. By tinkering backend digital processes, the insurance industry needs to reorient itself to the fast-changing demands of consumers during these difficult times. These challenges can be viewed as opportunities that have made the industry ripe for small-ticket insurance – a concept whose time has now come.
Small-ticket insurance offers ‘bite-sized products’ at low premiums and provides coverage with focus on specific needs of the customers. While insurers may continue to offer conventional products like motor insurance or house insurance, they may also look at offering customized products that offer risk coverage for valuables like watches, keys or smartphones or activities like morning walk, trek or cycling. The idea of offering ticket-sized products is now making strides in the industry and is here to stay. While low-income groups appear to be its natural consumers, small-ticket insurance is also fast-gaining popularity amongst millennials.
Breaking new ground with small-ticket insurance
From initially being viewed as an altruistic measure to cover low-income consumers against specific risks, small-ticket insurance has now started emerging as a strategic gamechanger in the backdrop of lower rate of insurance penetration and the constant need to guard consumers from financial risks. This revolution, while slow to hit the insurance industry, will now pave the way forward for insurers, and help them:
- Maximise reach and gain foothold in emerging markets
- Offer differentiation in terms of products and services
- Obtain competitive advantage by offering low-cost value to consumers
Clearly, small-ticket insurance has the potential to offer the benefit of sustainability to insurers. However, this revolutionary concept is not devoid of challenges.
Overcoming challenges with new possibilities
The wave of change in the insurance industry warrants a change in mindset, and the willingness to move beyond the status quo. From prioritizing short-term goals of immediate profits, insurers need to focus on the long-term goal of creating sustainability, which will yield profits, over the course of time.
Building such an ecosystem will be fraught with challenges of reaching emerging markets and understanding the heterogenous customer base. This lack of accessibility of potential customers will result in high distribution and acquisition costs, along with risks of failures to meet consumer demands and the low insurance awareness among customers. In such a scenario, offering competitive pricing may appear unviable, and comparing performances may pose further challenges.
However, these challenges can be outfoxed with a strong partner network that bridges the accessibility gap between the consumers and insurers. A strong partner network with an established distribution network can play a major role establishing trust and building credibility. Additionally, digital innovations like increased mobility, real-time connectivity can provide insurers with the much-needed flexibility and scalability, to reach their customer base through low-cost digital channels.
Small-ticket insurance adoption in India
Amidst the uncertainties presented by the current times, millennials are more aware of the need to get protection from financial shocks. For a generation that makes up 45% of the Indian workforce and previously stood by the maxim of living life as it comes, these times could act as a catalyst in increasing adoption rates for small-sized, customer-centric insurance offerings.
The insurance industry is hence, full of endless possibilities of efficiency breakthroughs that offset risks. If insurers could overcome these challenges with an efficient operating model, small-ticket insurance has the potential to add financial depth in emerging markets, thereby steering winds of change in the overall economy.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.