Despite the challenging business environment brought about by the global pandemic, India’s private life insurance industry has performed well over the last year or so.
The overall private life industry grew by 8% in FY21-22 and accelerated to 26% in the first quarter of this year. Constituting about 58% of the industry, the bancassurance sector had a significant role in enabling this growth.
He further told Asia Advisers Network that the company’s bancassurance business grew 21% in FY21-22 and 50% in the first quarter of this year.
“We are very pleased the way we have brought sales momentum in the last 12 to 18 months, and it's even more heartening that this market benchmark growth has happened at a very uncertain period,” he said.
How has COVID-19 changed things?
According to Mr Gupta, the need for life insurance typically exists on a subconscious level in customers so when a banker or agent reaches out to them, they typically need to make a hard sell to bring up life insurance.
Certain life stage events such as a death in the family or a health scare can also trigger the need for life insurance in consumers. In this regard, he said, COVID-19 has acted as a large-scale trigger and created a greater realisation among consumers to protect themselves from risks.
He also pointed how Google search trends in the last 12-18 months have shown that life insurance searches have grown significantly since the last year.
“Clearly there is a higher demand. There is customer intent with the heightened awareness towards insurance and there is a shift in the life insurance need from the subconscious level to the conscious level,” he said.
In addition, Mr Gupta said the last 18 months have also seen consumers become more comfortable with interactions online. Advice-based conversations are now happening digitally in many sectors including education and healthcare.
“There is a comfort towards technology. And though the shift is gradual, we are observing a similar comfort towards life insurance purchases as well,” he said.
More digitalisation to come
In the coming years, Mr Gupta expects technology to play a pivotal role in shaping the bancassurance sector in India, with consumer habits of online and mobile banking having accelerated post-COVID-19.
“A recent survey across markets has shown a 30% increase in online and mobile banking behaviour. If you look around, banks are making significant investments in technology and many of them are creating separate digital banks to disrupt themselves. With the objective of digitalisation, the convenience to the customer is one clear trend which is here to stay, and disruption will continue to happen with this object,” he said.
Another trend he highlighted is the emergence of platform banking – bank-operated digital marketplaces where customers can purchase physical goods or complete transactions of banking or non-banking services.
“Today, there are 3bn payment transactions happening in India [every month]. And if we overlay the emergence of millennial customers and their preferences, this trend becomes even more intense. Millennial customers have a great level of digital intimacy, and their comfort in doing independent digital transactions is high,” he said.
He also referenced a recent Deloitte survey in India that showed how 55% of the respondents said that they are comfortable in transacting on a financial superstore app.
“I see this trend as convergence. A convergence of the traditional and new age, convergence of touch and tech, convergence of different services or products under one roof, or, if I may say, on one screen. This is definitely here to stay and we need to embrace these ecosystems,” he said.
A third trend he brought up is the financialisation of savings – financial assets in India make up 50% of household savings. And these financial assets have grown at 13-15% CAGR in the last three to four years.
Substantial growth experienced in equity mutual funds and savings account deposits this year are also indicators of high customer confidence which in turn bodes well for life insurance, which makes up 15% of financial assets in India.
Areas to continue improving
Looking ahead, there are several areas that Mr Gupta feels the bancassurance sector must keep working at to continue driving growth in the life insurance industry.
The most important thing to do is to keep customer-centricity at the core of everything it does. He pointed to how the life insurance industry has taken big strides in the last 10 years, with the regulator creating customer-centric measures that have improved customer confidence, trust and loyalty towards life insurance products, which are evidenced by increased persistency rates and reduced complaints.
However, he noted that measures in bancassurance can be improved, and it is extremely critical that banks who have larger relationships with customers drive these initiatives.
“We need to stay obsessed with the customer needs. While banca models have taken action in some shape and form, I believe that the market conduct improvement is the need of the hour,” he said.
Another crucial aspect is how bancassurance can evolve its distribution model for customers that are becoming increasingly comfortable with online and digital banking.
At the same time, these customers still value human advice. Given that bank relationship managers account for only 15-20% of a bank’s customers, an approach that has been rapidly gaining traction is the idea of using a distribution model that combines both physical and the digital channels, or a “phygital” model.
Mr Gupta said combing digital and online services with brick-and-mortar will allow the sector to take advantage of the strengths of each individual channel.
“I see use of digital channels expanding further as new technologies become available and enable financial services companies to create differentiated offers, propositions which are competitively priced,” he said.
“But even as customers are turning to digital and mobile channels, they will continue to value human advice often in person – making physical channels an essential service that adds value at certain points.”
Mr Gupta expects the bancassurance model to continue to succeed and play a critical role in life insurance because it can tap into the huge customer knowledge base that banks have.
“As I said, life insurance need is a subconscious need, and it surfaces when there is a life stage trigger. What's great with banca is that with the banking transactions, there is a huge knowledge of these life stages, which are prevalent in the banking system,” he said.
“Hence propensity-based lead triggers can be generated or direct-to-customer nudges can be built with a hyper-personalised approach. This model can be backed with analytics, and we need to think in a direction of having the right customer at the right time and offering the right proposition.“
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