How consumer behavior has evolved in the life insurance sector

• We bring to you a series of columns from industry experts, looking back at the last 10 years.
• The columns will explore how the media, marketing and advertising industry has transformed in the last decade.
• Tarun Chugh, MD and CEO, Bajaj Allianz Life Insurance tries to decode evolving consumer behaviour and shares a few ways in which the BFSI sector is reaching out to them in today's digital era.

New-age Indians are unlike their previous generations. As a demographic, India’s population is getting younger and with more exposure to the world, the demands of the younger generation are changing. This change is forcing all industries to innovate, and the shift is more visible in the insurance space than anywhere else.

For instance, young people are considering life insurance not simply for protection but to achieve their life goals. Ambitions such as entrepreneurship, world travel, preventive healthcare and having a parallel career demand financial planning by young people.

According to a recent survey conducted by Kantar IMRB, 2 in 5 Indians have retirement related goals and the number is even higher in the metros with every second person wishing for a comfortable retirement as one of their life goals. In fact, retirement related life goals feature in the list of top 5 life goals for Indian millennials as well.

This has led to a paradigm shift in the way financial planning has been so far. Indians are now looking at planning their retirement early on in life to maintain their standard of living and achieve life goals even post retirement. There’s a lot more interest towards long term life insurance products and the appearance of new-age online ULIPs has really helped the takeoff for these products as they offer transparency and convenience.

Customers’ expectations from insurance products are rapidly changing as they demand more efficient service which match their lifestyle and needs example, Digital touchpoints, self-service apps and automated payment reminders. Increasingly, the product demand is also shifting towards new-age products which can be bought and redeemed online, have more transparency and don’t tangle the customers in complex terms and conditions.

It’s not hard to see that the industry is responding to these shifts comprehensively. And regulatory changes by the Insurance Regulatory Development Authority of India have also helped. For instance, IRDAI’s regular interventions have meant that products in the market are transparent and customer-friendly with more benefits than the terms and conditions attached to them. The intervention has also ensured that new products are innovative in terms of their structures and payouts rather than refurbished old schemes launched with newer names. This has led to renewal premium collections going up recently which has greatly helped affirmed people’s faith in life insurance as a product.

Insurance premiums as a percentage of GDP have been steadily climbing up as it reached 3.69% in 2017 from 2.71% in 2001. Gross premiums in India reached Rs 5.53 trillion in FY18, with Rs 4.58 trillion contributed by life insurance and Rs 1.51 trillion coming from non-life insurance. Even though it’s a significant development, the penetration level at 3.69% of the total addressable population remains quite low and provides itself as an opportunity for companies to innovate and reach the last mile.

The way to reaching new consumers is largely going to be phygital -- physical + digital. A recent research survey by PwC stated 47% of people research insurance online before making a buying decision as compared to 22% relying on agents. Moreover, 49% of consumers said that they prefer digital mode as their preferred channel for purchasing insurance followed by 32% who still prefer to call an agent. Interestingly, 18% of people want their insurance companies to communicate with them through emails – clearly emphasizing the increasing importance of two-way communication rather than a one-time sale model.

The life insurance sector is set for a big boost with the increase in digital proliferation and customer awareness. According to the Kantar IMRB survey, Indians choose life insurance as their preferred investment option for 60% of their life goals. This is a clear signal of the latent demand in the country which the insurance industry is eager to fulfil with innovative products, tech-enabled seamless services and newer distribution channels. Further, with the right pace of technology adoption and customer-centric business processes, India’s life insurance sector is poised to be the fastest growing sector.

- By Tarun Chugh, MD and CEO, Bajaj Allianz Life Insurance