The year 2016 was eventful for the insurance industry with many firsts. ICICI Prudential Life Insurance came out with the first initial public offer, or IPO, of the sector. Also, two big players, HDFC Life Insurance and Max Life, announced a merger. Experts say 2017 will be equally action-packed and promising for customers. Insurers, they say, will come up with one innovation after another, especially in the areas of technology, product and distribution.
In 2016, among the positives, the industry started reporting an increase in the persistency ratio.
"With growing competition, consumer retention took priority. Also, consumers' mindset towards life insurance is changing. They are no longer buying a policy for saving tax but for the larger goal of financial safety," says Yashish Dahiya, Co-founder and Chief Executive Officer, PolicyBazaar.com.
The industry also plans to cash in on demonetisation considering that the government's move will make people prefer financial savings over physical assets such as gold and real estate. V. Viswanand, Senior Director and Chief Operating Officer, Max Life Insurance, says, "The share of financial savings in household savings will go up. The life insurance industry is expected to get a fair share of this."
Another positive impact of demonetisation and shift to a cashless economy will be growth in retail health insurance policies. Nikhil Apte, Chief Product Officer - Product Factory (Accident and Health), Royal Sundaram General Insurance, says, "Several self-employed people who were not paying taxes were not buying health insurance as they had cash for emergencies. But with stricter monitoring of black money, most of the money should remain in bank accounts. "
Here are some ways 2017 is going to be different from 2016 for the insurance industry.
Technology will play a more vital role with companies shifting focus to profitability. Rakesh Wadhwa, Executive Vice President, Strategy and Special Projects at Future Generali Life Insurance, says, "Initiatives such as paperless proposal form, digital signature, e-KYC, e-policy and iris scanning will significantly improve customer experience and help insurers improve efficiency and productivity. A large number of customers is already buying online and a much larger number is using the net to decide what to buy."
Technology will also play a role in data science and analytics. Insurers collect a large amount of data over time. It can be used to bring more efficiency in claims, persistency and risk management. For instance, gamification has already started in general insurance, where telematics is being used to calculate premium rates. For example, your motor insurance premium was earlier determined by four factors - make, model, location and year of manufacturing. But now, one more has been added - driving skills. For example, Bajaj Allianz General's Drive Smart feature allows you to save up to 30 per cent premium on the basis of your driving skills.
Product innovations supported by data and technology will change the health insurance market too. Antony Jacob, Chief Executive Officer, Apollo Munich Health Insurance, says, "Mobile telephony will play a big role as features such as fitness tracking will help them reward customers who make efforts to remain fit. Web- and mobile-based solutions for health records will also catch on."
Time for Ulips
Debt unit-linked plans may become popular as interest rates are falling. "With interest rates falling, debt-based Ulips may take off. With market volatility and forecast for a tough 2017, traditional products are likely to see traction," says Dahiya.
"In health insurance, you will see more product designs that will allow you to pay less on the basis of how well you take care of your health. Health and wellness will get a bigger role," says Jacob. The launch of a universal health insurance scheme is also expected. "It will result in a big boost in penetration levels," he says.
With open architecture in place, insurers will be able to reach out to a larger customer base. V. Viswanand, Senior Director & COO, Max Life Insurance, says, "The open architecture in bancassurance may cause some disruption in the short term as new relationships evolve. But it is expected to be positive for all stakeholders in the long run." Under open architecture, banks are allowed to sell insurance policies of more than one insurer.