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  • December 2018
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Insurance and India's Digital Transformation

  • K.S. Gopalakrishnan
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Digital India
In Brief
India’s life and health markets continue to be vibrant with potential as well as challenges. Mr K.S. Gopalakrishnan of RGA India, looks at the current and future while evaluating the growing role of digital. RGA is the 2017 and 2018 winner for Life Reinsurer of the Year at the 21st Asia Insurance Industry Awards.
The overall economy is healthy and growing, with gross domestic product (GDP) rising at an average of 7% per annum since 2012, a rate that is expected to continue until at least 2022.  It is also rapidly urbanizing: 30% of its population lives in urban settings, and the number is expected to increase substantially by 2050. 
The life and health insurance markets have also had essentially healthy growth over the last four years. According to India’s Insurance Regulatory and Development Authority (IRDA), total new individual and group life sales grew from INR1,202 billion to INR1,750 billion (US$18.5 billion to $27 billion) – a healthy compounded annual growth rate (CAGR) of 13%. 
However, a deeper look shows some struggles: over the same time period, individual regular premium business grew by just 4.6% CAGR, new policy sales dropped from 39 million to 25 million. In addition, for fiscal year 2016 (ending March 2016), persistency in the 13th month for life products was just 61% and five-year persistency for savings products a low 39%. These persistency figures are causing insurers to give these products greater scrutiny, to determine underlying causes and take improvement measures. 

The above clearly presents an interesting challenge: here is a market with sizable potential. Can this potential be realized? 


One of the possible keys to the future of India’s insurance market is technology. Developments in the digital world are refocusing all forms of commerce to become more customer-driven, which is altering business and sales models in industries from insurance and retail to telecom and banking. 
Infrastructure development in India has focused more on higher-speed, lower-cost mobile platforms than on broadband – an approach fitting the rapid development of India’s mobile market. 
Mobile usage was already high in 2016, with the country’s Department of Telecommunications reporting penetration of 80% and mobile companies having more than 1 billion subscribers. 

Indeed, Indians today generally access the Internet on their smartphones. However, despite recent rapid gains, average Internet speeds in India still lag the rest of the world. At just under 9 megabits per second (Mbps) in late 2017, according to Ookla, India’s average mobile data speed is up more than 10% from the prior year’s but is still far slower than the global average of 17.4 Mbps. 

Expectation of growth in e-commerce via mobile phones

Still, more than 70% of Indians interested in life insurance and with Internet access, are already likely to do their research online. And fortunately, India’s internet speeds and access are likely to keep growing.

Plans are underway to launch 5G services in 2018, and it is anticipated that by 2020, 70% of all of India’s e-commerce will be transacted via mobile phones by 175 million online shoppers, 3.5 times as many as in 2015. In addition, also by 2020, more than 75% of India’s new internet users are expected to come from rural areas. 

Aadhaar voluntary biometric identification system

In terms of digital, the government has sought to integrate its capabilities with economic activities, to augment and ease access. 
Seven years ago, it enacted the Aadhaar voluntary biometric identification system to enable cashless payments. Aadhaar sought to register every resident of the country with a unique 12-digit identity number, linked to the person’s fingerprints, iris scans and a facial photo. Aadhaar has since grown into what is currently the world’s largest biometric ID system, with more than 1.19 billion members enrolled as of November 2017. 
Distribution has also gone digital. Currently, there are 20+ web aggregators and online insurance brokers in India and their businesses are growing faster than the industry average. 

These platforms are spurring greater awareness about types of insurance products. Aadhaar’s biometric information is already enabling near-instantaneous decisions, and e-signature technology is enabling sales to be finalised more efficiently. These developments are putting some pressure on life insurers when it comes to designing and pricing products and simplifying onboarding. 


These new capabilities are likely to spur continuing strengthening and growth for India’s life and health insurance markets. However, several challenges still need to be overcome. 

  • Languages: More than 75% of internet users in India expect to consume online content in their own languages. This could definitely pose a challenge: India has eight main languages, 22 official languages, and sizable speaking populations for approximately 122 languages. In addition, less than 15% (200 million) are conversant with English, and only 120 million are fluent. 

  • Safety net: A second challenge is the absence of a nationwide social safety net. Much of India’s population – especially in rural areas – are on their own when it comes to individual and family financial security.
  • High mortality protection gap: Life and health product penetration in India, although rising, is still low. The current sum assured to GDP ratio is 50%, indicating a wide protection gap. Although not the largest in Asia – China still has the largest – it is sizable compared to other countries in Asia, and it is growing.

    India’s near-decade focus on unit-linked and savings type products – products where the sum assured is a small component – is part of the reason. Distributor and customer reluctance to talk about death, disease or disability is another part, although this has begun to change. 
  • Low persistency: There is dissatisfaction with the current roster of savings-type products (five-year persistency of 39%). 

Bridging the gap

Can technology overcome these challenges and enable India’s untapped insurance market to reach its potential? One need for insurers is for the “quick win”. 
Technology could simplify the still cumbersome sales process, which has truly been a pain point for distributors and customers. Interactive artificial intelligence-based tools can be used to explain products and benefit illustrations, application forms can be simplified using voice-to-text technology, and premium payments can be made and accepted electronically as well. 
In addition, the recently-developed financial underwriting algorithms that can utilize credit bureau data may also generate much faster decisions, improving both sales team productivity and retention. 

India is not new to online insurance sales: its first Internet life product, a simple term policy, was introduced in 2009, and this segment continues to grow. However, as the focus continues to shift towards customers and their needs, specific solutions will need to be developed and tailored for their unique requirements.

Next: The Complete Experience

The ability to purchase life or health insurance with minimal parameds and painless information gathering and to receive a near-instantaneous decision is a reality in many parts of the world, but still under development in India. 
The goal is to enable Indians to buy life insurance online with their smartphone, using no more the three swipes of the screen, and provide that capability in all of India’s eight main languages.

What will take India there?

  • Financial Underwriting: While linking with credit bureaus might be a good start, it does not solve the painful parts of the process. Almost 90% of India’s population today is self-employed or works in small “unorganized sector” independent businesses.

    The only data now received during the application process is self-declared, which introduces material friction in the process.

    The Goods & Services Tax, a tax simplification package which came into effect 1 July 2017, is intended to improve financial record-keeping nationwide and could open up opportunities for insurers to link with more reliable data sources.
  • Medical Underwriting: India, unlike many other nations, does not have the concept of a family doctor. Insurers must therefore rely on self-declaration by applicants and confirmation via medical tests, which can introduce friction in the process.

    One way to eliminate this friction is by building risk assessment scores that create correlations with non-traditional data points such as age, education, nature of employment, place of living, credit score and so on. A second way is integrating health technology (e.g., wearable devices and fitness apps) with the underwriting process. 
  • Wearables and fitness apps: These are slowly becoming popular in India, but are largely used by younger, urbanized Indians and by fitness enthusiasts. Data from these apps may present valuable opportunities, but translating this new information into tangible outcomes – for health risk assessment and ongoing incentives to customers – is still new. A few health insurers have already co-created some products and services based on these new data streams, and the results will be of interest. 

  • Customer engagement: Advances in digital capabilities as well as new pools of data are providing tremendous opportunities for life insurers to engage meaningfully with customers.

    Once a new policyholder is on the books, engagement opportunities are currently limited to renewal premium collections. Social media and other touch-points, such as fitness apps and wearables, can offer insurers the opportunity to update customer information. Targeted marketing will help improve engagement scores and monetize it via upselling, cross-selling, referral generation, and improved customer retention. 
  • Innovative design thinking: Traditionally, insurance product designs have been driven by distributor inputs, insurers’ own product preferences, and reinsurer inputs. Using today’s data capabilities, insurers can apply the principles of what is known as “design thinking” – a human-centered approach to design innovation – to create and develop new products.

But… Life insurance is sold, not bought!

This has long been the standard story. However, as the market continues to evolve, the paradigm could flip, and life insurance might be more bought and less sold. 
The buying will still be largely online-offline (customer acquired online, but purchase made physically), but online-online (customer acquisition and sale all digital) capabilities are growing fast. 
Millennials – the emerging cohort of life insurance customers – are most comfortable using smartphones for every consumer need. Simplified and flexible insurance products utilizing simple language, and digital tools to enable ease of buying, and smart ongoing engagement are likely to transform India’s life insurance market. Sharp execution coupled with regulatory support will be critical.

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Meet the Authors & Experts

K.S. Gopalakrishnan
Chief Executive Officer (former), RGA India


Reprinted with permission of Asia Insurance Review (AIR)