Moving Towards Universal Coverage – New Decade, New Priorities

Life insurance has been sold in the country for decades but there used to be very little life cover in the products as savings, pension, etc made up the bulk. The return of private players in the sector in the current century, however, changed the scenario a lot. Since 2000-2001, coverage penetration, premiums and even the number of people employed in the sector have gone up substantially. Yet, much needs to be done to achieve universal coverage in the coming decades.

Till 2001, we did not have pure term insurance products covering more than 2 years. Even when the long-term life insurance products came in the market, their premium was quite high – at least three to four times of what is available today. So, insurance companies started looking at the pricing aspect and since 2008 we have seen a substantial decrease in the premiums and a simultaneous increase in the sum insured, which is the actual protection component. Over the last 10 years, the penetration of the sum insured part has been increasing in double digits.

India is a highly diversified country. And different segments of the society have different requirements. In recent years, protection has become a sought after product in the top-end segment. Insurance companies are now focusing on innovation to increase penetration in the middle class segment. This is where the growth is going to come in the coming decades.

However, insurers have a big task on their hands, convincing the Gen Z about buying pure life insurance products as this generation has no concept of ownership. They live in rented accommodation, have shared office spaces, order food online, travel and have experiences. So it is all about subscription economy or gig economy. To gain access to this segment, insurance companies need to understand their mind-set and provide them the experience of digital platforms which they are familiar with.

Since a large part of India is rural, universal life coverage will not be possible unless we reach out to farmers who generally don’t buy insurance. And for that digitisation of villages is necessary.

Millions of people visit insurance websites every month to learn about various products. India has around 2 million insurance agents who sell one to three policies every month, and build lifetime relationships with the buyers and their families. Online insurance aggregators feel pure life cover can get a major boost if the government allows them to share their site visitors’ information with agents on a profit-sharing basis. If such an agreement can be worked out, online insurers would like to rate agents, the way drivers are rated on Uber, and they feel this confidence building measure can lead insurance to grow 20x.

Inducements like restoration of tax benefits, availability of cheaper capital, and companies making insurance a part of their CSR activities will also push us nearer our objective of achieving universal coverage.