LIFE INSURANCE HAS TRADITIONALLY BEEN KNOWN TO BE RIGID AND INFLEXIBLE.

THAT’S
NOW MAY BE CHANGING

For generations, the life insurance industry with the help of strong actuarial functions and
working through intermediated distributed channels has tried to deliver its promise of financial
security. Few years ago, the life insurance industry hasn’t been very easy to deal with. People
have to spend hours on the phone to understand what the policy terms are exactly. But in the past
decade, the rules of the game have changed with consumers demanding for transparency, speed
and flexibility. The life insurance sector isn’t far behind as new competitors are looming on the
horizon, and the low interest rate environment makes the traditional business model a thing of
the past. With the introduction of big data analytics, user dashboards and Internet of Things
(IOT) the system has evolved into a user-friendly system of ensuring financial prudence and
security.1

The Insurance Regulatory and Development Authority of India (IRDAI), in order to give
maximum benefits to the policy holders has come out with proposed changes in the form of
IRDAI (Linked Insurance Products) Regulations, 2018 and IRDAI (Non-Linked Insurance
Products) Regulations, 2018. The proposed norms stipulate minimum death benefit for regular
premium plans, guaranteed surrender value, partial withdrawal for linked pension products etc.

1
https://www.aegonlife.com/insurance-investment-knowledge/life-insurance-traditionally-inflexible-changing/.
If these changes are implemented properly, it would mark a key transformation in how life
insurance products impact policy holders.2

IS INDIA A HUGE MARKET FOR LIFE INSURANCE COMPANIES?

The 2019 Economic Survey reveals that the insurance industry in India has huge potential to
grow as the insurance penetration in the nation was only 3.49% for 2016-2017 which is much
lower than the world average of 6.2%. Even china’s insurance penetration accounts for 4.7%
which is far better than penetration of insurance in India. However, recent trend shows that the
Indian life insurance density in India has grown over years with the growth in the middle class
and higher emphasis on financial protection. The introduction of digital technology in the
insurance industry has brought flexibility in this sector which will ultimately benefit the end
consumers.

 Trends Illustrating retail e-commerce sales in India from 2016-2022 (in million U.S.
Dollars)3

Figure 1: The statistics provides the retail e-commerce volume in India from 2016 to 2022. In 2016, the sale of goods
through digital channels in India amounted to 16.07 billion U.S. dollars in revenues and if this will be the case then the
revenue is estimated to cross 52 billion U.S. dollars by 2022.

2
https://www.financialexpress.com/money/insurance/irdai-proposes-new-guidelines-for-life-insurance-policies-
heres-how-it-will-benefit-buyers/1370222/.
3
https://www.statista.com/statistics/289770/india-retail-e-commerce-sales/.
DIGITALIZATION OF THE LIFE INSURANCE INDUSTRY

PricewaterhouseCoopers, a consulting and an audit firm has conducted a study titled Life
Insurance 2020: Competing for a Future to find out the needs of the customers interested in
taking life insurances. The study reveals that in countries like India and China, the customers are
tired of traditional model of selling life insurances where users buy policies through
intermediaries who receive a commission for the sale from the provider. The customers demand
for a system where they have the option to have a self-serving insurance platform based on social
and peer groups to seek advice and reviews about life insurance policies without presence of any
kind of intermediary or agents.

Let’s have a look at the number of digital buyers in India and how digitalization of the insurance
industry affects the customers as well as the industries themselves.

 Number of Digital Buyers in India from 2014-2020 (in millions)4

Figure 2: The statistics shows the number of digital buyers in India from 2014 to 2020. In 2014, there are 54 million
buyers which are expected to reach 224 million by the end of 2018 and 329 million by 2020.

4
https://www.statista.com/statistics/251631/number-of-digital-buyers-in-india/.
Now, life insurance providers can easily develop virtual networks that allow customers to get
advice via multi-channel platforms for sales, assistance and comparison with other providers and
this all becomes possible because the customers in India have become confident about buying
and researching insurance policies on the web. The life insurance providers lay much emphasis
on adopting digital mediums and technological changes of cloud computing and to make
customer delivery cycle automation and sensory tracking to be more efficient and productive just
in order to meet the changing needs of their customers. Since, customers forms the base of the
life insurance industry, it is important that the life insurance market is fueled by the preferences
of the customer.

In order to increase its profitability, the life insurance companies are switching to cloud
databases. The life insurance companies use these cloud databases to convert their fixed costs
into variables. Also, life insurance companies prefer cloud databases as it offers customers a
huge advantage, the most important one is hassle free paperwork. The advent of cloud computing
has reduced the efforts to a large extent. For instance, a person wanting to change the address
provided in his policy document can easily do so by not spending much of his time on his phone
or waiting in insurer’s office.

 E-commerce share of total retail sales in India from 2014-20195

Figure 3: The above graph shows retail e-commerce sales as a percentage of total e-commerce sales. According to the
statistics, in 2015 the total e-retail sales accounted for 1.7 percent of all retail sales in India which is expected to reach 4.4
percent in 2019.

5
https://www.statista.com/statistics/379167/e-commerce-share-of-retail-sales-in-india/.
Thus, the life insurance sector does not depend only on the cloud computing and an online
database. These online databases merely provide the companies digital information about the
customer behavior and risks. According to a market research firm, Kantar IMRB, the number of
internet users in India will reach out 500 million mark by January 2018 which shows that there is
no boundary in the digital sphere and the possibility of expansion is endless. With such a huge
customer base, the insurance companies have a great opportunity to derive benefits from the
digitalization of the insurance database. The companies by employing big data analytics can
easily predict and understand customer tastes, preference and needs. Through this, the companies
are in a better position to offer its customers tailored services and products. The most important
thing to be noted here is that the development of technology in the life insurance companies is
not limited to urban population only but is also catering the needs of the rural market. The
increased availability of internet in the rural market allowed the life insurance companies to
develop and provide products and policies by considering the needs of the rural market.