The life insurance industry has seen several phases since the entry of private players into the sector at the turn of the millennium. There has been executive & regulatory action in the previous months with the insurance ordinance being issues & enabling guidelines being rolled out for banks to become insurance brokers. These can have far reaching implications for the operating architecture of the industry. However before I talk about 2015, it is worthwhile spending sometime on the years that have preceded it.
Broadly, these can be classified under 3 phases. The first phase was the one where private players started to establish themselves in the market-place. The second phase coincided with the growth in the equity market where new business premiums grew on the back of investment-linked product selling. This was a phase when insurers, regulators & customers all believed nothing could go wrong. More insurers and distributors entered the industry increasing the reach of insurance products multi-fold during this period. In hindsight, it would not be wrong to say that a major proportion of growth trajectory was based on ‘riding the wave’ and left several customers dissatisfied at the end of wave once the global financial crisis hit home. So it was not surprising that just as the party had got going, the regulator stepped in to take away the punch bowl. This in effect laid the stage for phase 3 which has lasted longer than most industry watchers would have expected. Regulatory intervention is now taken as a fait accompli post the tectonic shift in regulations since 2010. Margins of Indian life insurers companies ended up as amongst the lowest in the world. Several agents exited the industry in its aftermath as their earnings ability declined. For an industry that prided itself on bringing protection to individuals & households saw a long phase of stagnation in new business premium collections.
But as they say one tends to learn more from one crisis than from multiple successes. Phase 3 also helped segregate - to use a commonly used term – the men from the boys. You could clearly see the large private players breaking out from the pack as market share started to polarise in their favour. These are the players who today are in a position to innovate and offer a balanced product mix to consumers. New segments such as term plans, annuities, health plans, low cost ULIPs have started to reignite growth for these players. These players have the ability & financial muscle to invest in improving processes, next generation technology & digitisation. These players have the wherewithal to reach out to customers and manage high persistency levels & drive growth through renewal premiums. Large private players now have well known brands which can compete in most markets with the market leader as a new set of consumers enter the insurable population. These players are also well integrated with bancassurance partners besides having a diversified channel mix. We have already seen market share of this segment of players grow in the current financial year and this should pick up more steam in 2015.
As the cost of regulation becomes even more onerous through further caps on expense management, insurers would need to be prepared to fine-tune their business models even further in the coming years. As we exited 2014, ordinance of the insurance laws (amendment) was issued by the Government of India. Beyond, the headline on increasing foreign investments to 49% the ordinance offers more teeth and flexibility to the regulator to frame guidelines around commissions & expenses, customer experience management & citizen charters, claims settlement, etc. This would require insurers to be nimble enough to adjust their business processes.
As the industry starts to attract more foreign capital and if a few insurers decide to go in for a public listing, there will be a need for the players to disclose more financial & non-financial data than what is required currently. This would increase the levels of transparency and the understanding of how an insurance industry operates amongst analysts and media at large.
Going forward I believe the industry should be able to sustain a smooth upward growth curve growing at 12-15% CAGR over the next 5 years on the back of relatively stable economic policy & industry regulations.However, this phase of growth will be very distinct from the previous phase for all market participants Consumers will have greater access to product information & associated metrics such as claims ratios. Distributors would need to increase focus on product fitment & need based selling. Insurers would need to deploy enabling technology, analytics & risk management tools to become consumer centric and to help distributors become productive.
2015 could potentially be that year when we see a distinct shift in the fortunes of the industry.
Mr Amitabh Chaudhry has been with HDFC Life since January 2010. HDFC Standard Life is today recognized as the premium brand in the insurance space and is one of the India’s largest private insurers. Before joining HDFC Standard Life, he was the MD and CEO of Infosys BPO Ltd and was also heading the Testing unit of Infosys Technologies Ltd.View Complete Profile
A critical aspect of a retirement plan is how and where to invest. The assets you choose to invest will vary depending on several factors, which include your risk tolerance and investment time horizon.
According to a study by the Insured Retirement Institute, only a few women consider becoming financial planners because they deem the job stressful and uninteresting. The time has come to stop relying on someone else for financial security. Financial planning is nothing but determining short and long-term financial goals, and creating a balance to meet these goals.
Swabhimaan Careers is one of HDFC Life’s strategic initiatives to build long-term customer relationships. The overall objective of insurance is to compensate the financial loss caused due to untimely death of a bread winner.
The Vision and the Mission continue to be relevant and set out aspirations for an organization. But the question that an organization needs to ask is how do they get there? Is it possible to define a 'decision architecture' that guides actions of each employee?
For millions of people in India, the concept of life insurance still remains a mystery. Thanks to the new media channels, more and more people are becoming aware of the significance of life insurance. For those, who wish to develop fundamental understanding of the concept of life insurance, here is a quick snapshot.
Consumer is king. With the shifting of focus on the goods and services reaching out to the consumer rather than the other way round, Mobile learning embodies just that, by taking training not just to the doorstep but also to the learner in person. Just as an individual is empowered to carry his office with him at all times, M Learning empowers him to carry his training program with him, shattering the barriers of space and time.
Reinsurance is an insurance that is purchased by an Insurance company from one or more other insurance companies to manage the risk. Reinsurance helps in transfer of risk from one insurance company to another. It is also called “insurance for insurers” or “stop-loss insurance”.Read More