Changing face of life insurance industry
04 Mar, 2014 01:01 PM
Here is my prescription for a happier 2014 for Indian Life Insurance industry:

1.Start Positive:

Let's begin 2014 by having a positive outlook. For the past couple of years everything about India has been in red. The shining picture of our country as a business destination is fading. A depreciating Rupee, low growth in IIP, high inflation and weak political environment - too much to handle for even a resilient country like India.But all is not lost. The country can get back on course. Through active policy decisions convey the message that India is open to business. India's inherent strengths - a young country, increasing household income and rising education level continue to provide the reason to believe in long-term growth potential of the country. However, it is important to have a segmented view of India where the country can be divided into wealthy citizens, large middle income and the emerging India. Any discussion on opportunities in the country has to be around these three different India. Talking specifically about life insurance, I believe a significant growth story lies in middle income India which is expected to be more than 500 million by 2025.

2. Build a stable and growth friendly environment:

It is time to kick-start growth momentum in Indian economy and what better than impetus to infrastructure industry to achieve that goal. Large number of infrastructure projects are awaiting government nod and are stuck due to various reasons including environmental clearance. If Indian economic growth cycle has to be revived, which is not a choice anymore, it is time to build infrastructure and keep in check the fiscal deficit. Bringing focus back on household financial savings will have a role to play in it.

In India, life insurance has played a critical role in aggregating small household savings and redirecting it to long gestation infrastructure projects through investment in infrastructure companies and government securities. However, over the past 3 years new business premium has declined and the industry has faced significant surrenders. It is time for life insurance industry to come together to help consumer understand the true purpose of life insurance i.e. long-term savings and protection.

Five specific steps which can be taken by Industry are

i) Consumer Awareness and Education campaign,
ii) Inclusion of Financial Literacy in course curriculum in class 10th to 12th,
iii) Need based sales in which financial awareness is inherent,
iv) Help consumers define long-term in relation to their life stage needs and
v) Bring greater awareness towards life risks.

3. Incentive for long-term savings:

To kick-start greater traction for financial savings in Indian households, there is a need for tax incentives for long-term savings which should be clearly differentiated from short term financial savings. Tax incentives have been a key driver for the growth of life insurance industry, both in India and other markets. The effectiveness of such tax policies is clear with regard to shifting national savings to life insurance and promoting long-term savings. An additional tax incentive of Rs.1.5 lakh to life insurance and Rs. 1 lakh for retirement plans could result in significant growth in life insurance industry which will also result in additional inflow of Rs. 90,000 crore in infrastructure and Rs. 2,20,000 crore into government securities by Financial Year 2020.

4. Rebuild customer trust:

While over the past couple of years IRDA, the insurance regulator, has worked towards creating a regulatory framework to win back the customer confidence, it is time the industry take charge of connecting back with its customers in the new year. At every customer touch point there is an opportunity for greater effort - Mandatory need based sales, transparency in selling process and documentation, customer friendly product design and features, more efficient customer service & claims management and above all continuous dialogue and engagement with consumers to understand their changing demands. If we do improve at every step and aim for consumer delight, we will do what is right for our consumers and rebuild that relationship of trust which is integral to life insurance business.

I firmly believe, life insurance industry has vast potential for growth in the country. If we get together with customer benefit as the motto in 2014 and with the belief that we ourselves can change our destiny, I expect to see a quick turnaround in the Life Insurance industry in 2014.
Source : My Iris

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