Business Transformations expected in the Life Insurance Industry

Covid-19 has affected competency of businesses across all verticals including life insurance. Though the life insurance vertical has seen a growth of 18% YoY, it is expected to decline in the current year by 0.8% as compared to 8.8% in the previous year. The lockdown norms caused grave operational, economic and financial hardships to everyone involved in the business chain which has resulted in a drastic reduction in disposable incomes in the hands of people. The only silver lining has been that business leaders have been compelled to think dynamically and come up with innovative ways that can make the company more customer centric while still maintaining steady revenue and growth margins. India has closely answered these calls and an exciting change has be seen in the financial functioning of majority businesses over the past months.

It has become crucial for insurance companies to refocus and create a very agile and adaptable financial model. In post COVID-19 period, one will see a shift in the way insurers are presenting a product as well as how people are buying it. The increasing volatility of the market and financial uncertainty has compelled people to realize the financial stability an Insurance Pension Plan brings along with it.

From Product Based Pricing to Person based pricing: According to a study conducted by McKinsey, majority life insurance executives agree that product innovation is the key to unlock the full potential of the market. Understanding customers and what they need vis a vis the pricing they are willing to accept for any given segment of product is crucial data for any insurance company. To get there, insurers can take a leaf out of consumer companies’ page and adopt a more tactical and supple approach towards their products. IndiaLife Insurance has closely implemented these strategies and been a part of the customers’ financial journey by strategically aligning the companys’ vision, overall market trends and financial capabilities to come out with fresher product mixes.

Prioritizing expenses

The changing dynamics should help insurance companies set their priorities in terms of investments and liquidity management. Focusing on less capital-intensive products, implementing concepts such as Zero-Based Budgeting and regrouping essential resources can prove to be true game changers during the time. Another way to maintain the liquidity balance is by incorporating Internet of Things (IoT) technologies which can be a high return reaping investment as it can considerably help reducing manual intervention, maintain a steady stream of data and help utilize human resources in a better fashion. Using such Artificial Intelligence and other technology driven initiatives can help reducing expenses by 40 % and support the organization in intangible ways too.

Financial planning

With lack of disposable income in the hands of customers, the premium payments are expected to be delayed which will eventually lead to a possible liquidity crunch to the insurance companies. Insurance companies might have to take suitable measures to be more flexible with their premium cycles. It is likely that insurance companies might be faced with many liability, asset and investment pressures during the time as well. Thus, reworking these delays into the future financial budgets and pre planning for the possibility of reduced liquidity might prove to be extremely crucial.

Financial Adaptability

While around 80% insurance business is done through the physical form in India, new Insurance distribution models have seen a drastic change as many companies have been forced to adopt direct-to-consumer insurance channels. With this change, it has become essential for business leaders to assess how the bottom line will be affected and what measures can be taken to create greater value and induce financial efficiency, staggered growth and profitability.

Cautious financial prudence and transparency on the part of companies and individuals will be the way ahead during these times. If veracious steps are taken in a timely manner, this might actually turn out to be a good time to gain a competitive edge and pull through with great proliferation.