The Covid-19 pandemic has affected the financial salubrity of businesses across the world. The silver lining has been that business leaders have been compelled to think on their feet, reimagine and innovate ways to deepen customer centricity and yet maintain steady revenue and growth margins. India has closely answered these calls and an exciting change is seen in the financial functioning across industries. The insurance industry has also seen a similar wave of change. The life insurance vertical has regularly seen a growth of 18% YoY for five years till FY19. However, in FY21 it is expected to see only 5-10% growth over compared to FY20. Thus, it is crucial for insurance companies to refocus and create a very agile and adaptable financial model in order to sustain the past growth trends.
Product – Cost Innovation: In the post Covid-19 period, one will see a shift in the way insurers are selling product as well as how people are buying them. A recent McKinsey study notes that the life insurance industry collectively agrees on a shift from product-based pricing to person-based pricing. Customers are now more aware of their insurance choices. They are demanding products that match their exact requirements. Product innovation vis-à-vis product pricing is crucial to manage financial commitments and investments. Putting #CustomerFirst, insurers are closely implementing these forward-looking product development strategies to be a part of the customers’ financial journey. By strategically aligning the company’s’ financial capabilities to business innovation, as an organisation, we have been able to steadily grow within the life insurance segment.
Financial Prudence: The changed business dynamics have nudged insurance companies to relook at their investments and liquidity management priorities. Focusing on less capital-intensive products and conserving capital, considering Tier 2 capital for short term capital requirements, implementing concepts such as Zero-Based Budgeting and re-aligning essential resources in the new normal can prove to be true game changers. Another way is to take this opportunity for improving efficiencies by deploying technologies based on Internet of Things (IoT) & AI. These technologies can aid in reducing manual intervention, maintain a steady stream of financial data and analytics and help utilise resources in an optimised manner. With the use of relevant Insure-Tech , organisational expenses can be reduced by nearly 40%.
Financial Planning: With a lack of disposable income at hands, the premium payments by customers may be delayed. This could eventually lead to some deviation in cash-flows for insurance companies. Having said which, insurance companies need to be empathetic to their customers and look for ways to help them ensure continuity of their insurance contracts. This also calls for re-assessing impact of possible change in cash-flows and asset liability planning to ensure all customer commitments are addressed.
Financial Adaptability: Life insurance sale process essentially requires the insurer to understand financial needs of the prospect and suggest a suitable product considering all other relevant factors. This makes the process of sale of insurance consultative. In India, it is largely done through personal interactions. However, over past few years, with advent of technology, new ‘Direct to customers’ insurance distribution models have seen a fair adoption rate. This has been possible through digitisation in insurance distribution covering various steps in insurance sale process. With ever evolving technological landscape and ‘fail fast and improve’ philosophy, spends in these changes need both critical evaluation but quick decision. It has become even more essential for financial leaders to assess how the bottom line will be affected. They need to evaluate what measures can be taken to effectively juggle between ‘creating value’, ‘inducing efficiency’, ‘sustained growth’ and ‘steady profitability’.
Undoubtedly, the business bearing of COVID-19 has proven to be a once in a lifetime disruptor for most of us in an active work environment. While we constantly speak of ‘the New Normal’, I am sure we are still building our own perspectives around it. The earlier we get clarity around it; the better we will be able to deal with ‘the Next Normal’. For me, this is definitely the first ever event where the whole world is putting up a united front to battle the impact of pandemic. Helping our customers prepare for certainties of life becomes even more relevant in the face of disruption. As an organisation, we would like to work towards the certainties and plan, adapt, refocus and reimage a better financial future for our customers.
Kedar Patki, Chief Financial Officer, IndiaFirst Life Insurance Company Limited.