The initial months after the regulations took effect saw both customers and insurance companies tread with caution. Sales progressed slowly with companies introducing two-to-three near similar Ulips to test new ground, leading to commentaries of non-differentiation between offerings by different players. However, the regulatory changes augured well for all stakeholders and by the end of the year, customer interest and sales picked up substantially, giving insurance companies the much needed confidence boost to introduce newer and more innovative products. Insurers have progressively started introducing such products covering areas including, child plans and single invest plans. This trend should pick up pace in the current year. Single invest plans especially are expected to witness good investor interest given their attractiveness as an excellent investment vehicle. Enhancing efficiencies and thereby productivity of delivery channels is the central challenge for insurance companies in the new regulatory environment.
Renewed emphasis will be placed on highly efficient channels such as Bancassurance which, in turn, will considerably gain in strength and leverage. A significant proportion of insurance is still sold through individual agents. Managing this channel effectively is the key to ensuring persistency. One can expect developments that will seek to strengthen the effectiveness and commitment of the agency force to ensure that the customer receives consistent level of service through the policy term besides reduce the number of orphan policies (a term used to denote those policies whose agents are no longer active). Further, mandatory need-based selling whereby insurance agents will be required to assess the customer's exact insurance needs based on his financial and personal profile may become an integral part of the sale process. This should check mis-selling. Companies on their own accord can also be expected to add check layers to weed out any remaining scope of mis-selling.
ll these necessitate greater commitment by the insurers to agent education which will result in better quality of advice, reducing customer churn and improving persistency — a key for insurers to succeed in the new reality. New and innovative outreach mediums that not only rationalise cost but also find increasing customer acceptance such as online and mobile platforms are expected to gain significant traction going forward. Some insurance companies have already introduced products exclusively designed and structured for online selling.
The overall cost of insurance has progressively reduced over the past decade, and this trend will continue in the time to come. While premiums on pure-term policies have dropped by a 50%-60%, commission as a percentage of premium has also reduced from 9.1%-7% over the past five years. This has enhanced the appeal of insurance and brought it within the easy reach of millions. Further, with the country's GDP and savings rate growing phenomenally, interest in investment products per se is expected to scale up significantly. Insurance, with its safety premise and longterm investment appeal, should significantly benefit from these factors.
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