Online insurance is the focus area for the future: K S Gopalakrishnan, AEGON Religare Life Insurance
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The life insurance industry has experienced immense changes in the past few years and the challenges are expected to intensify in the coming years, says K S Gopalakrishnan, MD & CEO, AEGON Religare Life Insurance.
In an interview with Sanjeev Sinha, Gopalakrishnan talks about the latest trends in the Indian insurance industry and also shares his growth expectations and business outlook. Excerpts:
What are the latest trends in the Indian insurance sector, particularly in the life insurance segment?
The life insurance industry has experienced immense changes in the past few years and the challenges are expected to intensify in the coming years. Insurers are expected to focus on customer centricity, reducing costs and improving service standards.
The latest trends seen in the insurance industry are as follows:
1. Online insurance
Over the last few years, the shift to online insurance has brought to the customer a large number of protection and savings solutions that were not available earlier. Connectivity and the shift to mobile e-commerce will soon play a significant role in the sector. Increasing use of mobiles and mobile apps is impacting how companies conduct business and interact with stakeholders. This is also why online insurance is the focus area for the future.
2. Big data and analytics
Big data and analytics provide valuable and actionable insights. Big data plays an important role in risk management, enabling companies to analyze risk characteristics and claims statistics. Big data helps companies monitor brand reputation by analyzing comments in social media. By doing so, companies can immediately address issues that may damage their reputation or brand.
3. Training insurance agents
Agents are one of the trusted channels for selling insurance products. Insurers are increasingly investing in training and education of agents in order to enable them to deliver better service to customers.
4. Social media and collaboration
Social media is about helping people connect. Social media platforms such as Facebook, LinkedIn and Twitter, are frequently used in marketing to drive brand awareness and connect with customers. These platforms can also be used to improve collaboration, decision-making and processes both within the company and in interacting with distributors.
5. Distribution channel management
In a multi-channel world, existing distribution channels remain as new channels emerge, complicating channel management. Today they are managed as discrete distribution channels unable to integrate for seamless interactions. Different elements of insurers' communications are shifting at different speeds and older channels are not going away. This increases the burden and confusion for insurers, who are required to invest in supporting new channels without being able to shutter older channels.
Experts suggest that insurance should be bought only for protection. Do you agree?
Insurance is bought to secure oneself against life's uncertainties. Insurance can have different purposes such as to ensure a regular income in case of loss of a bread earner, to secure a child's future, to ensure that one is financially equipped to face a critical illness etc. The meaning of buying insurance i.e. protection might be the same, but the purpose may differ depending on a person's requirements.
Insurance companies have been, for some time now, predominantly shifting their product mix away from ULIPs. What are the reasons for this?
For us, the product mix of Unit Linked Insurance Plans (ULIPs) and traditional products has been 40:60. At AEGON Religare Life Insurance, our philosophy is to design products and solutions which address specific consumer needs, whether it is an ULIP or a traditional plan. We train our distribution channels to offer solutions only after understanding consumer needs and doing a thorough risk assessment of customer profiles. Sale of ULIPs also depends upon the customers' sentiments about the stock market. It is usually seen that when the stock market rises, the sale of ULIPs also goes up and vice versa. Insurance being a long-term financial tool, we try to educate customers about the need to stay invested in a product like ULIP for a longer period of time to get the best returns.
These days insurers in India are not only aggressively promoting their products but also adopting multi-channel distribution strategies. What is the need for this and what is your strategy in this regard?
While traditional channels like agency and third-party distribution have been contributing around 80 per cent to 90 per cent to the business, we have observed that online distribution is evolving as the preferred mode of purchasing insurance. A typical online customer is well aware of his needs and has been taking informed decisions. We have observed that an online customer is more consistent and understands that life insurance is a long-term purchase and serves the purpose for which it is bought. With the e-commerce revolution, the Indian consumer is becoming more and more comfortable transacting online. This has led to Indian insurers realizing the potential of online distribution.
The increase in internet and mobile usage can be major influencers in shaping customer preferences and research of products online. While Indian consumers still believe that getting advice from an agent is an important part of purchasing life insurance, we have also observed that online research on life insurance has shown an increasing trend. We have been a pioneer in online product offerings and at present have an exhaustive suite of products addressing various consumer needs.
Currently every insurance company seems keen on growing their online presence. Do you think their thrust on this channel will continue going forward?
With a population of around 1.3 billion, India is the second most populous country in the world. What is more, a large percentage of its population is youth population. Young people are the innovators, creators, builders and leaders of the future. However, they can transform the future only if they have skills, health and information to enable decision-making and real choices in life. Internet usage is growing rapidly mainly because of young users and technological innovations. Mobile e-commerce in India is growing rapidly with mobile platforms accounting for 41% of total e-commerce sales in 2014. We expect sales through this channel to grow further in the coming years. Consequently all insurers are expected to go online to push sales of their products.
Are you also looking at entering any new segment or launching any new product?
We are pioneers in online insurance and our aim is to strengthen the online platform by designing and introducing simple, need-based protection products. We have recently launched three online plans - iSpouse, iCancer and iIncome - and will continue to innovate in this space. There is a huge untapped market in India which can be catered to through innovative online plans. iSpouse is a joint life term assurance plan aimed at working couples and iCancer is an insurance product covering all stages of cancer. iIncome is a non-linked, non-participating term assurance plan designed to protect the household's income stream for a fixed term in the event of the unfortunate demise of the bread-winner who would be the insured.
What are your company's growth expectations for the next 5 years?
As a company our strategic planning would always focus on the customer. Data analysis indicates that Indians have started accepting the internet as a medium of both communication and transaction. Revenue from online insurance sales in India has grown 22% year-on-year. This trend is poised to grow stronger with increase in smart phone usage and in internet penetration. We see this as an important opportunity. Further, we intend to create a clear differentiation in terms of customer experience and value proposition in the next 5 years.
In an interview with Sanjeev Sinha, Gopalakrishnan talks about the latest trends in the Indian insurance industry and also shares his growth expectations and business outlook. Excerpts:
What are the latest trends in the Indian insurance sector, particularly in the life insurance segment?
The life insurance industry has experienced immense changes in the past few years and the challenges are expected to intensify in the coming years. Insurers are expected to focus on customer centricity, reducing costs and improving service standards.
The latest trends seen in the insurance industry are as follows:
1. Online insurance
Over the last few years, the shift to online insurance has brought to the customer a large number of protection and savings solutions that were not available earlier. Connectivity and the shift to mobile e-commerce will soon play a significant role in the sector. Increasing use of mobiles and mobile apps is impacting how companies conduct business and interact with stakeholders. This is also why online insurance is the focus area for the future.
2. Big data and analytics
Big data and analytics provide valuable and actionable insights. Big data plays an important role in risk management, enabling companies to analyze risk characteristics and claims statistics. Big data helps companies monitor brand reputation by analyzing comments in social media. By doing so, companies can immediately address issues that may damage their reputation or brand.
3. Training insurance agents
Agents are one of the trusted channels for selling insurance products. Insurers are increasingly investing in training and education of agents in order to enable them to deliver better service to customers.
4. Social media and collaboration
Social media is about helping people connect. Social media platforms such as Facebook, LinkedIn and Twitter, are frequently used in marketing to drive brand awareness and connect with customers. These platforms can also be used to improve collaboration, decision-making and processes both within the company and in interacting with distributors.
5. Distribution channel management
In a multi-channel world, existing distribution channels remain as new channels emerge, complicating channel management. Today they are managed as discrete distribution channels unable to integrate for seamless interactions. Different elements of insurers' communications are shifting at different speeds and older channels are not going away. This increases the burden and confusion for insurers, who are required to invest in supporting new channels without being able to shutter older channels.
Experts suggest that insurance should be bought only for protection. Do you agree?
Insurance is bought to secure oneself against life's uncertainties. Insurance can have different purposes such as to ensure a regular income in case of loss of a bread earner, to secure a child's future, to ensure that one is financially equipped to face a critical illness etc. The meaning of buying insurance i.e. protection might be the same, but the purpose may differ depending on a person's requirements.
Insurance companies have been, for some time now, predominantly shifting their product mix away from ULIPs. What are the reasons for this?
For us, the product mix of Unit Linked Insurance Plans (ULIPs) and traditional products has been 40:60. At AEGON Religare Life Insurance, our philosophy is to design products and solutions which address specific consumer needs, whether it is an ULIP or a traditional plan. We train our distribution channels to offer solutions only after understanding consumer needs and doing a thorough risk assessment of customer profiles. Sale of ULIPs also depends upon the customers' sentiments about the stock market. It is usually seen that when the stock market rises, the sale of ULIPs also goes up and vice versa. Insurance being a long-term financial tool, we try to educate customers about the need to stay invested in a product like ULIP for a longer period of time to get the best returns.
These days insurers in India are not only aggressively promoting their products but also adopting multi-channel distribution strategies. What is the need for this and what is your strategy in this regard?
While traditional channels like agency and third-party distribution have been contributing around 80 per cent to 90 per cent to the business, we have observed that online distribution is evolving as the preferred mode of purchasing insurance. A typical online customer is well aware of his needs and has been taking informed decisions. We have observed that an online customer is more consistent and understands that life insurance is a long-term purchase and serves the purpose for which it is bought. With the e-commerce revolution, the Indian consumer is becoming more and more comfortable transacting online. This has led to Indian insurers realizing the potential of online distribution.
The increase in internet and mobile usage can be major influencers in shaping customer preferences and research of products online. While Indian consumers still believe that getting advice from an agent is an important part of purchasing life insurance, we have also observed that online research on life insurance has shown an increasing trend. We have been a pioneer in online product offerings and at present have an exhaustive suite of products addressing various consumer needs.
Currently every insurance company seems keen on growing their online presence. Do you think their thrust on this channel will continue going forward?
With a population of around 1.3 billion, India is the second most populous country in the world. What is more, a large percentage of its population is youth population. Young people are the innovators, creators, builders and leaders of the future. However, they can transform the future only if they have skills, health and information to enable decision-making and real choices in life. Internet usage is growing rapidly mainly because of young users and technological innovations. Mobile e-commerce in India is growing rapidly with mobile platforms accounting for 41% of total e-commerce sales in 2014. We expect sales through this channel to grow further in the coming years. Consequently all insurers are expected to go online to push sales of their products.
Are you also looking at entering any new segment or launching any new product?
We are pioneers in online insurance and our aim is to strengthen the online platform by designing and introducing simple, need-based protection products. We have recently launched three online plans - iSpouse, iCancer and iIncome - and will continue to innovate in this space. There is a huge untapped market in India which can be catered to through innovative online plans. iSpouse is a joint life term assurance plan aimed at working couples and iCancer is an insurance product covering all stages of cancer. iIncome is a non-linked, non-participating term assurance plan designed to protect the household's income stream for a fixed term in the event of the unfortunate demise of the bread-winner who would be the insured.
What are your company's growth expectations for the next 5 years?
As a company our strategic planning would always focus on the customer. Data analysis indicates that Indians have started accepting the internet as a medium of both communication and transaction. Revenue from online insurance sales in India has grown 22% year-on-year. This trend is poised to grow stronger with increase in smart phone usage and in internet penetration. We see this as an important opportunity. Further, we intend to create a clear differentiation in terms of customer experience and value proposition in the next 5 years.
