Huge potential in untapped market

THE YEAR GONE BY

While in the beginning of 2010,Life insurance companies witnessed a 20 per cent jump in weighted new business premium according to a data released by the Insurance Regulatory and Development Authority IRDA,the year also ushered sweeping regulatory changes that altered the way industry worked. It marked significant changes in product profile of unit-linked insurance plans that capped the overall charges and also imposed a minimum prescribed return in order to offer a better deal to investors.

It was the fastest set of regulatory changes ever seen in the shortest period of time. Unlike the Unit Linked product changes in January 2010,the regulatory changes in the later part of 2010 impacted not only the products but also the broader insurance business model.

The initial response was that of apprehension and close speculation,however,once the changes were announced,most players were quick to comply with an appropriate plan of action. The transformation that earlier could have taken 10 years will now perhaps be achieved in the next 3-4 years,thanks to new customer centric regulations.

THE YEAR AHEAD

The new changes gave policyholders an option to invest in insurance plans,which were more simplified,less

expensive and long-term in nature. Going forward,the regulator is also likely to set up a policyholders

protection fund that will benefit both,the consumers as well as Insurance companies.

While the long term perspective for insurance continues to remain bright for India,pressure on cost and efficiency and increased focus on quality over quantity will continue to dominate the strategic thought.

Some of the key initiatives which will continue to metamorphose the Insurance offerings with more value additions and customer centric approach.

FOCUSED DISTRIBUTOR RELATIONSHIPS

Existing agency model in India is at variance with internationally prevalent models. We will see the model being driven by fewer hierarchies,leaner approach and an added element of entrepreneurial spirit. The role of bacassurance,larger broking house is expected to increase in the months ahead along with emergence of cost effective alternate channels such as Internet,DM,and variants in Agency channel.

COST RATIONALISATION

The right operating model will be more collaborative and would require organisations to strategically balance their decisions on reducing operation costs and bringing in process optimizations in the next year.

CUSTOMER SEGMENTATION

Appropriate training and refined customer segmentation will play a pivotal role in delivering effective sales support to offer best suited products to the customers. This will start becoming prominent across all processes of Insurance companies from sales to service.

VALUE ADDITION

Regulatory changes will lead to more efficiency in products and services and will augment offerings for increasingly knowledgeable consumers who demand high value.

TECHNOLOGY USAGE

Customers today are increasingly time poor,want it fast,now and cheap. They seek sincere guidance and support in evaluation and this makes the role of the advisors or Insurance sellers more critical. Hence it will become extremely important next year to leverage technology for better sales,customer service,and rapid claims settlement to improvise customer needs analysis and truly partner with them.

Exploring the bottom of the pyramid and rural markets

The industry is expected to focus on effective strategies that will increase insurance coverage among rural and low-income households. Thus,bottom-of-the-pyramid products such as micro-insurance,will find favour.

There is immense scope for selling through1-2 millions telecom franchisee,NGOs,RRBs,Cooperatives,Post Offices,MFIs,Agri-retail for the insurers. It will be worthwhile involving the unbanked population through flexible premium paying products and community based policies.

TAPPING GROWTH

A buoyant economy is estimated to lead to an increase in Indias investible wealth to US500 billion by 2012. This buynut demographic surely indicates that Indias share in the worlds life insurance industry is set to rise.

With the introduction of the new ULIP guidelines in September 2010,companies will have to cover sales and distribution structures and back-end operations model to optimize their cost structures while focusing on a customer centric product line. The author is C FO ,Birla Sun Life Insurance