Insurance penetration is expected to increase in the coming years owing to multiple factors that include changing consumer perception and realisation of financial security, the easing of IRDAI regulation regarding product approval and distribution, customization in products, balanced channel mix, and digitization efforts at the company level.
During 2017-22, the life insurance industry has grown at a CAGR of 11% in total premium and 17% in new business premium. It is estimated to grow at a CAGR of 9% until 2027. At 3.2% penetration, India ranks 10th in the global life insurance market and ahead of China (at 2.4%) and UK (at 3%).
To better understand consumer preferences towards life insurance, Benori conducted a snap poll to find that 70% of respondents claim financial safety for the family to be their primary motivator for purchasing life insurance. 91% of the respondents say their perception of life insurance has changed, from being viewed as an investment to being for protection. 55% say that they bought their policy through an insurance agent, while 23% purchased it online (including bank portals, web aggregators, and direct purchase through websites).
While the poll indicates the importance of the agent, insurance agencies take the second spot among distribution channels. Bancassurance is the primary avenue for consumers to discover and purchase life insurance, making up 55% of the distribution share in 2022. The prevalence of the bancassurance channel is attributed to consumer trust and pre-existing relationships with banking institutions, along with banks’ in-depth knowledge of their customers’ wealth, enabling them to provide products aligned to their customers’ needs.
Insurance agencies’ share in the distribution mix has been declining, falling from 30% in 2017 to 23% in 2022. The decreased growth in premium purchases via agencies is not being overtaken by the bancassurance segment, but rather direct-to-consumer (D2C) channels. Although D2C distribution of life insurance is still in its nascent stage (3%) in India, players such as Tata AIA,
and are experiencing strong business growth through D2C online distribution. Tata AIA, Kotak, and SBI Life have shown strong business growth of more than 45% from last year within this channel.
Smartphone penetration and the popularity of fintech offerings in Tier II/III regions will continue to increase D2C insurtech channels.
With the life insurance industry on a growth trajectory of 9% from 2022-2027, Benori Knowledge finds five key trends that will define the next five years. Pure protection products will continue to witness demand across age-groups and demographics, despite the hike in its prices. ULIP will see growth as well. Novel ways of interacting with the customers through hyper-personalization and more intimate digital sales interaction will encourage companies to explore newer ways to enhance customer engagement and experience. Companies will invest in Data Science and Analytics to better understand the customer personas and needs.
Ease of access and On-the-go Insurance will be an important business objective for life insurers and speed will emerge as a differentiator. Finally, partnerships with market specific Insurtech/Fintech companies are expected to increase following the relaxation of regulations from IRDAI. Insurance firms are looking to partner with fintech companies or Insurtech startups which function markets that overlap with their customer base. Local startups can also assist insurance companies in working to increase their rural footprint and help to offset their agency-based expenses.
Commenting on the findings from the report, Ashish Gupta, co-founder and CEO of Benori Knowledge, said, “Life insurance companies must work on leveraging advanced tech stacks like AI/ML and customer segment analytics to derive actionable insights from customer behaviour to serve a better-suited, easy to understand product line. Investments in these technologies will also aid in developing intelligent process automation that can reduce underwriting errors. In order to achieve this, effective partnerships with emerging fintech/insurtech companies should be pursued.”