Insurance in the time of the pandemic

The life insurance business in India is at an inflection point. Recognizing its need for financial protection in combating future risks, people have a better understanding of the value of life insurance in the middle of a pandemic. Notwithstanding the multiple challenges, the industry has transformed itself in a short span of time to fulfil this enhanced demand. From digitally capacitated distribution strength to robust risk management models, India’s life insurance sector has worked hard to serve the interest of the consumer at a difficult time.   

The last one year has been a period of adjustment for the industry. This pandemic rendered the most basic element of the business unfeasible – face to face interactions. While digital and ecommerce models have been reaping dividends for the sector in recent years, life insurance for Indians continues to be synonymous with a trusted advisor who helps them through their key life stages.  

However, 2020 brought a paradigm shift – the personal interactions had to cease owing to a country-wide lockdown. To cope with this change, as in all walks of life, customers moved into the virtual world in large numbers, necessitating digital adoption by insurers. Consequently, this past year saw significant investments by the industry in strengthening technological infrastructure, which could facilitate business-critical functions like retraining the workforce spread across multiple cities in multiple states, advising customers, assisting them through the buying journey and much more.   

New business premiums fell significantly in the early months of financial year 2020-21 as life insurers and distributors struggled to cope with these dynamics. Life insurers had to create digital platforms that could support a smooth digital transition for their distribution partners. From self-learning newer ways of interacting with customers, to using data analytics to meaningfully interact with them, insurers and distributors worked hand in hand to overcome these challenges. 

There is no doubt that without digital transformation the industry would have come to a screeching halt in the early months of the pandemic. However, though the benefits of digital adoption have been empowering, the risks have been overwhelming too. 

An unavoidable outcome of accelerated adoption has been the risk of higher fraudulent incidences. With the threat of misuse of payment networks and data theft already existing, a newer challenge emerged for the industry, that of separating a genuine customer from a suspect one. In absence of personal interactions, fully assessing the risk profile of a customer has now become an arduous task for the industry. 

With the objective of effectively serving the genuine customer, it was incumbent upon the industry to create a strong risk infrastructure that could proactively plug any fraudulent instances. For example, data analytics has helped tremendously in creating predictive models to detect fraudulent requests at buying stage instead of claims.  

But, for this essential services sector, market realities continue to change at a brisk pace and insuring India amid this pandemic has become a daunting task. The ravages of the second wave have made the end of this public health crisis uncertain. In absence of credible information and data, the insurance industry has found itself in a tricky place. Recalibrating future expectations has become the next challenge at hand and as more people get vaccinated, the industry is attempting to gain a better understanding on the future of India’s health. 

As we look to the future, resolving India’s contentious relation with insurance and improving access will be the priority areas. India has among the lowest insurance penetration of 3.76% of the GDP. This reflects a huge market potential, as a large number of population is either uninsured or under-insured. For a country, that has largely paid healthcare expenses out of their own pockets, the Covid 19 pandemic has been a rude awakening. This rude awakening could make way for a more secured India as insurance takes center stage. 

First published in Business Standard on May 24, 2021