Insurance Penetration in India – Did Privatization Assist?

Insurance Penetration has always been a topic across the world in any insurance forum. But is the industry doing right things to actually bring it up. Let’s take stock on the current situation in respect of non-life insurance industry in India. 

One of the objective of privatization was to increase penetration level of insurance. In the year 2001, penetration level of Indian Insurance Industry stood at 2.71% and according to 2018-19 Annual Report of IRDA, it is at 3.70%, an increase of 36%. In non-life insurance, penetration level in 2001 was 0.56% and it grew to 0.97% in 2018, which is an increase of 73% in a span of two decades. 

Though the market has seen a tremendous growth of more than 1200% in terms of premium income in two decades, insurance penetration is lagging far below compared to other similar markets. Why is the industry losing out on penetration? The one-line answer to this question is “Lack of Trust” on Insurance players by the insuring public. Many believe affordability and awareness is low, which affects penetration. But many upper middle class citizens who has the surplus also does want to take insurance.

Honestly, I am not sure, if the industry is truly focusing on increasing penetration even after two decades of liberlisation. Insurance Penetration cannot be achieved by Up-selling to corporates, which has been the main focus of insurers. Cross-selling and Up-selling to the retail customers/ individuals can only increase the penetration. I am sure we all agree that insurance is still being sold and not bought by customers. Unless, there is a voluntary buying of insurance, we will never be able to improve the penetration table. 

The pundits who recommended liberlisation of insurance industry in India looked at the penetration levels of the developed countries which is dominated by private players and wanted to emulate the same in India. However, they probably did not notice the level of customer service offered by the players in those markets and the trust built by them amongst the insuring public.

 The trainers of customer service are teaching mostly about polite talks, listening skills, answering phone calls within three rings and so on. But the real customer service is much beyond these. The claims personnel are taught to focus on faster claim closure, how to look at claim files with hawk’s eye to identify fraud etc. This kind of orientation has led many claims personnel to look at ways to avoid a claim rather than finding ways to pay. One of his key performance measurement is about savings he brought to the company. This performance measurement motivates him to cut as much as possible at the cost of customer service. I am not sure if any company measures renewal retention ratio of policies which had a claim. This should be the key performance measurement for all claims personnel. It is to be noted that more than fifty percent of customers leave their insurer without complaining, if they are not satisfied with the service.

Many insurers have the word “Empathy” in their Claims Department Mission statement. Is it really being followed by their personnel is something they have to introspect.

Insurance Industry in India has a long way to go to gain the trust of insuring public. It requires a massive attitudinal change from the players to make a difference. The insurance industry has always been focusing on ways to increase their numbers by adding more channels and technology to reach out to their customers. However, there is no monitoring on how these sales are happening. In other words, quantity of sales is measured but the quality is unchecked and the buyer in most cases are either sold with false promises or a product which he/she may not need. The principle of ‘Caveat Emptor’ will not apply to insurance since buyers are not buying a product, which can be tested before purchase. Insurance is a promise and selling has to be by trust, which is lacking with the retail customers. We can see this in many corporates itself wherein the CFO/ Insurance Manager who decides insurance placement for his/ her company would not have insurance for his/ her own personal property. It is worth for an insurance company to take a survey of their own employees who are actually their customer having non mandatory insurance for their assets.

Most sales personnel/ channels lack complete knowledge of the product/ claim process. Hence, when a claim arises they are unable to assist their customer and redirect them to another team who had no clue of promises made at the time of sales. This kind of lack of ownership frustrates a customer and he/ she loses faith on the insurer.

Although the bosses of insurance companies talk about customer delight or better customer services being offered by their, ground reality is completely different. Personally, I have had four incidents in the last fifteen years with both government and private insurers. Believe me, none of my claims experience was pleasant and there was no delight. Recently during a conversation, one of my good friend who is currently working with an insurance company at a senior management level mentioned to me , "Nothing has changed in the industry".

So where do we begin the change?

The change has to begin from the top. The bosses have to understand that the primary function of an insurance company is to pay Claims and this must be percolated down the line. Few more pointers are:

• Stop measuring claims personnel performance based on average claim payout or number of claims closed without payment.
• Focus on renewal retention of customers who had claims.
• Take genuine feedback from all customers who had a claim and implement corrective measures immediately.
• Last but not the least educate and equip sales channels. People on the field must have complete knowledge about their products as well as the customer.