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Digital In Life Insurance: Potential & Pitfalls

Global firms puts India LI market opportunity under ‘Differentiated Strategy’ implying that it is not going to be an easy market. Same time, life insurance data indicates that top 7 private players market share in India has steadily increased from 59% in FY11 to 76% in FY17. Success in such a competitive environment will need smart play and this is where digital is playing & will continue to play a pivotal role. BCG in one of its earlier report stated that there may be 12-20X growth in digital influence.

But let us first look at the opportunities & challenges for the Indian LI market.

Now, the good news.

  1. Life insurance penetration in India is still low at approx. 2.5%-3%. The gap has worsened steadily from the peak of 4.4% seen in FY2010, slightly gaining from 2.6% in FY15
  2. GDP per capita for India has risen 6.2% (CAGR) from 2007-2017, next only to China (11.9%) and Indonesia (7.4%)
  3. APE per policy has seen steady increase for the last few years
  4. Urban population share in overall population is expected to rise from 2012 levels of 31% to more than 50% by 2050
  5. India’s population is still young, though expected to age slightly in next few decades
  6. Digital push by current dispensation and the digital affinity of Gen Y provides more effective ways for life insurance companies to reach out

But there are challenges too!

  1. Worsening fiscal balance to GDP and comparably lower public debt to GDP implies a lower capacity to stimulate domestic demand, which is not a great news for our economy
  2. Researches also puts India under ‘Differentiated Strategy’ for large global life insurance players, compared to China which is under ‘Market Leading’. That means that expectation from this market on growth & profitability of this sector is relatively low. Basically, India is not going to be an easy play for life insurance players

The mix of the opportunities & challenges will mean that Indian LI will remain to be competitive:

  1. BCG in its 2020 vision released in FY14, spoke of 2-2.5 X growth in sales
  2. Same time, life insurance data indicates that top 7 private players market share has steadily increased from 59% in FY11 to 76% in FY17.

Success in such a competitive environment will need smart play and this is where digital is playing & will continue to play a pivotal role. For the uninitiated, digital is much beyond just mobile & internet.

Why digital is going to be important?

  1. Gen Y customers who wants to interact on their own terms/ channels of their choice
  2. Customers expects personalized experience
  3. Increasing awareness means strong digital influence on individual decision making including competitive information
  4. Social tools have empowered customers to connect & share; which can have both positive & negative consequences for the LI players
  5. BCG expects 12-20X growth in digital influence (FY13-20)

To quote from a PwC report “Insurers can no longer rely on agents to drive volume. Rather, they need to create demand by investing in digital marketing capabilities (Internet, mobile, email, social media, etc.) to grow volume”

From a life insurance perspective, we see following 4 digital levers:

  1. Digital Delivery: Not only for acquisition but also for claims & servicing
    • Digital channels enablement. The list will include mobile, social, web; right from brand building & marketing to customer service & claim settlement
    • Digital enablement of physical channels. This means making the physical channels e.g. agency, Banca by leveraging digital. E.g. is the likes of a tablet/ smartphone used for acquisition & onboarding of customers by agents
  2. Digitalization of the process. This means minimal paper work, minimal physical data flow; maximize end to end process automation; operational effectiveness improvement using digital.
  3. Data…& yes Data will be going to be the most critical factor down the line. While organizations are saddled with lots of data, those who are smart enough to develop smart use cases leveraging the data are going to taste faster success!
  4. Innovation platforms: Matured organizations are said to be bad at innovations compared to start ups. This can be better addressed if organizations get an incubation lab enabled by innovation platforms, where a small set of dedicated people can experiment the next gen ideas before being rolled out!

So, that’s it? Apply the above 4 levers and get going? Not really! The reason is that devil is in the details. Implementing such levers need effective contextualization of the problem/ opportunity at hand. So, what will determine the use cases of digital for an LI organization will depend on certain strategic directions:

  1. Customer demographic distribution. Who are my typical customers from a geographic distribution and income distribution point of view? Different sets of customers will need different approach. A few examples?
    • Income higher than 7 lakhs per annum: Digital rival’s agents as influencing factor in LI buying decision at around 50% each while at lesser income, agents influences starts increasing reaching to 80% at lower levels of income
    • Digital has significant influence on metro & small cities: In a survey across metros and smaller cities, it was found that life insurance was only below clothes/apparel and accessories in online purchases
    • Not every customer will be equally digital savvy:
      • Age group 25-30 can be considered as Digital Natives: Digital is their primary & preferred channel, needs more push for LI but will have more first time LI purchasers and hence less brand luggage
      • Age group 30-45 can be considered as Digital Aliens. Digital is a strong alternate channel, has deeper pockets but will have stronger brand connect to existing players
  2. Customer lifecycle stage:
    • A younger person will prefer an income generating product compared to a middle aged who will look for protection plan and the 50-60s aged looking for pension plans (refer HDFC Life Investor presentation for customer age distribution across LI product types….quite interesting)
    • Similarly depending on lifecycle, a customer need may be different in terms of service requirement e.g. inclusion of wife post marriage in nominee & digital can be a great enabler here
  3. Type of product:
    • Simple, OTC (over the counter, pre-underwritten or simple) products can be easily be a candidate for leveraging direct channels e.g. online while
    • Complex products may be candidate for a O2O model (Online to offline) or may be digital leveraged physical channels only

Now it will be interesting to see what different LI players in India and across in other key economies are doing in the digital front:


So, what’s next?

  1. First; there is lot of improvement scope to leverage digital more effectively both from acquisition & service point of view. Look at leveraging e-commerce & fintech platforms to augment the direct selling, as Aegon Life recently spoke about.
  2. End to end process automation is still a dream for most of these organizations and at best, it is partial or half-baked and that provides significant scope to optimize TAT, Cost & Accuracy
  3. Lot more opportunities will present themselves e.g. IOT, Machine learning, Robotic technology, Artificial Intelligence (all these are interrelated). Organizations must develop right use cases around them to leverage effectively. Data will be at the center of all these!

Before we end, a look at the performance of a few private players in Indian LI ecosystem (FY1617):

Above data can help one to infer & answer a few key questions:

  1. Who are focusing more on Group & who on Individual customers? (Tata AIA, ICICI Pru; BSLI, BALIC & see HDFC growth graph…got it?)
  2. Which products type are they focusing on? (DHLF Pramerica, ICICI Pru, Max Life….got it?)
  3. Which are the channels the players are betting on in Individual segment? (BALIC, DHLF Pramerica, Aegon, HDFC life….diff players diff approach…got it? Have a look on Direct channel which includes Web, Online, Mobile channel acquisition also. As per available data, ICICI Pru had 0.7% of its premium coming from Online while BALIC has 2.2% coming from online in Individual segment)


  1. Public disclosure documents of respective LI players: FY17
  2. BCG Vision 2020 report on Insurance
  3. Annual report of AIA, Nippon Life, Ping An: FY16
  4. Investor presentation of ICICI Prudential, HDFC Life: FY17
  5. “Life insurance is “sold” and not “bought”— for how long? A perspective on direct-to-consumer life insurance”- A PwC global study
  6. Life insurance policies most popular amid online shoppers: Study- rediff.com quoting a study by Max Life & Nielsen in India; 2014; BCG India Life Insurance 2013

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