General insurance: journey from products to solutions
27 Jan, 2014 11:11 AM
The general insurance sector has registered robust growth of 18 per cent CAGR in the last five years amid macro-economic headwinds. Despite the encouraging growth, the industry continues to witness under-penetration across retail as well as corporate segments. Almost half the vehicles that ply on Indian roads do so without insurance. Despite the success of social health insurance schemes, a large percentage of the population does not have health insurance. Even today, an Indian relies on out-of-pocket spending for 65 per cent of her health ailment-related expenses.

Products such as home insurance, domestic travel insurance remain at sub 1 per cent penetration level. In addition to the penetration benchmark, adequacy of coverage too remains significantly lower than global and even emerging market peers.

The industry needs to address the issues that have become a hindrance to increasing penetration. Apart from the focus on enhancing distribution, building underwriting capabilities, improving service and adopting technology, there is an urgent need to innovate on the product front. The industry needs to reduce its dependence on external support in the form of regulations e.g. mandatory third party insurance in case of motor insurance or tax incentives in health insurance.

Instead it needs to build more value in its product proposition, thereby changing the paradigm from ‘product push’ to ‘product pull’. This will require changing the approach of designing products bundled with features to developing customer-oriented solutions. There are multiple examples of this strategy being successfully adopted by other industries — be it IT hardware companies adding software and consulting capabilities, paint companies providing home solutions or clunky telephones transforming into smartphones with user-friendly apps.

A non-life insurance policy is a low involvement product that may or may not be consumed during its life cycle. For a value driven economy like India, it is extremely important to create compelling reasons for customers to buy a non-life insurance scheme, which goes beyond the basic promise of protection. This applies to all sub-segments, be it health and motor insurance for individuals or marine and property insurance for companies.

Health insurance as a category can benefit immensely from the solutions-driven approach. There is a clear opportunity for insurers to evolve from health risk financiers to adopting a more proactive approach of managing customer’s health. An entire gamut of health management services can be introduced, which include wellness solutions, planned check-ups, second opinion, knowledge dissemination tools, disease management etc.

Such initiatives are being undertaken in the corporate health insurance space by some insurers, and it is time to widen the scope to include retail customers as well. In addition to enabling customers to derive far more value from their policy, such measures will also help reduce instances of emergency or high-end medical treatments, thereby, bringing down the cost of claims for insurers, giving them room for reducing premium amounts.

Out-patient treatment (OPD) is another segment, wherein insurers can bring in tremendous value through a compelling product-service mix. Till date, the industry has focused only on in-patient hospitalisation (IPD) benefits, which contributed less than 30 per cent of the total healthcare spend in India. With the corporatisation of primary healthcare centres (PHCs), insurance firms have the opportunity to introduce OPD benefits in their health insurance policies. This would entail covering expenses as well as providing assistance towards consultation, diagnostics.

Given the higher occurrence of OPD treatment, customers can derive far greater value from their health insurance policy. It will also provide insurers the opportunity to engage with their customers and build customer connect. Again, some insurers have already launched these services to corporate and some segments of retail customers.

Motor insurance as a category has evolved from basic third party insurance to comprehensive policies with a number of add-on covers. However, the future lies in bundling service elements into the existing product proposition. A customer will be able to derive far more value from his motor insurance policy if the insurer takes over the responsibility of ensuring quality repair of the damaged vehicle through tie-ups with service stations instead of merely financing the repair expenses.

Similarly, assistance services such as emergency vehicle replacement or temporary accommodation can be introduced to provide emergency help to the customer in case of vehicle breakdown. This approach instantly transforms a motor insurance policy from being perceived as a mere protection tool to being valued as a comprehensive assistance offering.

The general insurance sector has scaled up significantly in the last ten years, especially after the entry of the private sector. With several catalysts going for it, focusing on specific growth drivers especially on the solution front will ensure that the industry is able to attract a larger segment of the population into its fold.

Likewise, using telematics to reduce marine losses and providing risk management and mitigation solutions for property risk would transform marine and property insurance, with progress already being made by some insurers in this direction.
Source : Financial Chronicle

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