Life insurers are at the cross-roads

The global life insurance industry has seen major transformations over the past decades, but none have been as course-altering as the Covid-19 pandemic. The pandemic reminded life insurers across the globe that protecting people against risk will continue to remain at the heart of insurance offerings. It also brought into focus two dominant themes, health and retirement, as the imperative business drivers in the decades ahead. By 2030, the number of persons aged 60 and over will have increased by more than 50 per cent.

Furthermore, lifestyle diseases such as diabetes and heart disease are estimated to account for nearly 71 per cent of all yearly deaths worldwide, representing a higher share of mortality risk. As life expectancy rises and health patterns shift, insurers are set to play an increasingly important role in their customers’ health in the years to come. This will be aided hugely by technological advancements.

For instance, globally, the concept of life insurers offering connected wellness is fast picking up pace. Connected wellness services link several digital devices like mobile apps, wearables and sensors with an analytics framework that provides customers the ability to track various health parameters. This enables life insurers to drive continuous engagement with customers while letting them track and manage health progress. It typically has a “wellness score”, based on which life insurers offer rewards like premium discounts to further motivate them to lead a fitter lifestyle.

While in India, some digitally advanced players are increasingly developing products that offer premium discounts as part of an associated wellness programme, in light of a pronounced push towards health and fitness, there remains a massive opportunity in the coming years. In the wake of Covid-19, life insurance providers who offer critical illness covers, additional riders, and wellness benefits will remain relevant and earn customer loyalty.

Secondly, changing economic and demographic trends are here to offer tailwinds to retirement products. India’s life expectancy has consistently risen over the years. In the backdrop of Covid-19, however, an aging population cannot solely depend on government and employer-sponsored pension schemes for financial security. As per a World Economic Forum report, India is among the few countries with larger retirement savings markets, although having a significant retirement-to-savings gap that is estimated to exacerbate in the coming decades. Retirees around the world will outlive their savings, the report says.

As government pension and retirement schemes become less sustainable, ensuring financial security for the older population will become the central focus for life insurers in India. This would involve rethinking the conventional one-size-fits-all strategy, and modernising retirement solutions currently being offered, making them more comprehensive and customised. Also, creating vistas for people to retire in unconventional ways, helping build financial resources for the golden years, and enabling discretionary spending while ensuring investments until retirement, becomes an important element to design. Apart from this, insurers must also look at developing solutions for both protection and income creation that provide for alternating phases of retirement asset accumulation.

Alongside fundamentally reshaping the world we knew, Covid-19 brought a sea shift in people’s approach to life and its insurance. In many ways, the pandemic instituted a necessary reset — it resulted in increased awareness of the value of protecting loved ones, underlined the importance of mortality protection, and put financial wellbeing and health matters at the forefront in the minds of Indians.

In the decade ahead, the life insurance sector is at a similar crossroads. On the back of a strategic focus on health and retirement, the sector has the opportunity to meet evolving customer needs and unlock long-term growth and profitability. Winning life insurance firms would excel by personalising every aspect of the customer experience, facilitating flexible solutions, and collaborating with government and regulators more systemically.

The writer is managing director and chief executive officer, Max Life Insurance