The COVID-19 pandemic has slowed the growth of the Indian life insurance industry in recent months. Industry players hope that the long-term prospects will pick up as protection and guaranteed savings products find favour with customers in these uncertain times.
The Indian life insurance industry is currently in the throes of contraction. Beginning in March 2020 the industry registered a sharp decline in new business (first year premium) collection for three consecutive months. These were the three months when India remained under lockdown to control the spread of coronavirus pandemic.
Growth during 2019-20
In March, which is generally an important month for new life insurance business in India, the new business premium collection declined by 32.17% to close at $3.39bn compared to $4.99bn during March 2019. Despite this, the Indian life insurance industry closed the financial year 2019-20 with 20.60% growth and a business figure of $34.52bn as compared to business of $28.62bn during the financial year 2018-19.
The start of the new financial year 2020-21, however, did not bring much relief. The first two months of the financial year 2020-21, April and May saw the slide continuing. First-year premium income of the 24 Indian life insurers during these two months, totalled $2.73bn, a decline of 27.92% compared to the $3.79bn in the corresponding period of 2019.
Impact of operational restrictions short term
Max Life Insurance chief marketing officer Aalok Bhan said, “While operational restrictions will have a short-term effect on growth, this unprecedented situation will create greater realisation amongst the community and shift the focus to safeguarding the financial future of loved ones from any calamities. This will increase the overall demand and penetration of life insurance in the country.
“Based on our experience, it has been observed that pandemics bring with them a ‘flight-to-safety’ propensity, where a sudden increase in appetite for high-quality and safe risks are observed as compared to investments in risky assets.”
He said, “This provides tailwinds to protection and guaranteed products where we foresee some shift towards such product forms which are healthy from a margin perspective as well.”
Protection and savings products in growth mode
In April and May a slight increase was observed in term and guarantee plans, as consumers understood the need for these plans better. Also, the industry hopes for notable recovery in the second or third quarters of the current financial year.
Mr Bhan said, “We have seen that more consumers are preferring investments in guaranteed savings products along with protection products to secure the future of their loved ones in these uncertain times. We expect greater demand for such products and our offerings are also in line with designing specific short-term product solutions.”
While the demand for guaranteed savings products may increase, people will continue to focus on important life-stage goals such as children’s education and marriage that are time-bound.
Distribution channels go digital
“Our distributors will continue to have discussions with prospective customers around creating a safety net through such products – term plans, critical illness plans, health insurance plans and create independent plans for each of the non-negotiable life stage goals,” said Mr Bhan.
The COVID-19 pandemic has also triggered aggressive and rapid digital transformation plans for the entire insurance industry. With digital becoming all-pervasive across segments, it is gradually getting more integrated into the everyday business of life insurance as well.
Mr Bhan said, “We have observed that adoption of digital modes has enabled long-term access across all aspects of an insurer’s operating model and it will continue to do so more in the future as well.
He said, “Development of partner ecosystems, whether for technology, data, channels, or other needs will be more rapid now, altering not only how insurers work with partners but also within their own new ecosystems.”
This focus on digitisation will further enhance the scope of the Indian life insurance industry which has been following a more traditional approach of sales in the past. A