Millennials want to participate, create products with insurers: SBI Life MD

Top industry leaders discuss the future of the life insurance industry and how they attract millennials

What are the traits of millennial customers and what needs to change for them in the insurance industry?

Sanjeev Nautiyal: Millen-nials would like to participate, share their views and actually create products in the insurance space. The consumer of today, especially millennials, want to co-create products with life insurance companies. The millennial customer wants the life insurance industry to be more flexible and participatory so that his voice and inputs are also heard and taken cognizance of.

With the web aggregators and new fintech companies coming in, the industry is trying to achieve it. But it is difficult since regulation is wrapped around those products. But as millennials continue to push the boundaries, I think they will be testing the regulators too.  So I see a lot of innovation happening in the insurance space with the regulator’s blessing. The millennial customer today values clear and honest communication. Insurers have to put that into perspective and reimagine the customer journey.

N S Kannan: Millennials comprise of various age groups and any generalisation or stereotyping is fraught with huge risk. The age of millennials today differs from 18 to 35, this is a huge heterogeneous population which cannot be boxed in by stereotypes. They are not reckless at all and their spending habits and consumer behaviour are vast and varied. You have to talk their language in terms of what their life goals are. We should be open for partnership and non-conventional distributorship within the space.

Suresh Badami: There is a broad generalisation that millennials are brash and reckless but we don’t believe so. Our ad campaigns talk of being young and responsible. There is this whole segment  that is growing and there is a slight shift into insurance. It  is not a product that millennials will not look at but they might look at it at a different stage. They will buy insurance if it adds value for them. For millennials it is more about an ecosystem and not just a single product. We need to create not just categories but an entire support system.  

Yashish Dahiya: Below the age of 23, we rarely see people buy insurance. Customers between the age of 24 and 40 probably form 75 per cent of all insurance purchase on our platform. We are not technology-oriented but more research-oriented. The older generation was more trusting and not research-oriented. Millennials do their own research, identify what they want to buy and trust Google and their research more than what anyone says. They are rational, questioning in nature and choose products better. The biggest resistance we find is that most of them are not yet long term investment thinkers. We are not seeing churn in millennials but they question the lock-in period and want more freedom. If there wasn’t a lock-in, there would be more investment purchases from millennials.

How do you woo millennials?

Badami: We need to go back and look at the value proposition that we can bring across to the millennial population, we realise that it is a fairly wide age band. When we look at any customer segment, we look at how we get their know-your-customer (KYC) right, unfortunately KYC has become more of a tick-mark of documentation but the real approach is to go back and understand customer profiles. Millennials have different spending habits and different outlook on life, so their consumption behaviour and brand preferences are different. So we have to think about how we communicate to them using available technology.

Millennials are also into a different kind of networking and have a two-way communication with a brand so we have to create the right kind of ecosystem and products. We are looking at how we can create products more suited to their needs and how we use technology to provide instant service. There is also a rub-off effect of millennials on the rest of the population and expectations of a certain quality of service. So it applies to our entire gamut of customers.

Nautiyal: Perhaps a millennial customer would like a core product with a lot of frills and peripherals and would like to exercise his discretion to pick up the pieces or parts that are relevant for his life stage. Currently, we have more structured products where there is hardly any differentiation or modification. If a customer today wants a core product and certain additional frills, he should have the discretion to choose that and be able to modify the products. Simplification of products is also very important. The products should be de-jargonised. The ecosystem should be transparent in order to cater to millennials.

Pankaj Razdan: Whats-App is the easiest and most convenient way to connect with people in the country. Fortunately, most millennials are mobile agile and live their lives around their devices, so WhatsApp helps with them. But we didn’t start WhatsApp service because of millennials, but because a very wide section of demographics uses it.

Tarun Chugh: Millen-nials do not look at death benefits so we are focusing on life benefits since most of us today want to gain while we are living. We say life insurance but what we do is death insurance. All our messaging, products and advertising is negative. That has got to change and we have changed that in our company and we have taken the track that we will be the enabler of life goals for our customers. We will help the customers figure out their five-year goals and beyond and help in fulfilling them.

Kannan: For the younger bracket of millennials, we will look at awareness building. For the second bracket on their first jobs, we can offer a low ticket saving scheme. Close to 50 per cent of our term policies comes from millennials and it is a very good segment. So, even for term, millennials become a very good segment. In terms of selling with millennials being digitally native, we need to have the processes in place to make sure that we can place a product in the way they want to pick it up. The buying process has to be smooth, else the millennial will move out. Policies have to be issued instantly. Our average age for protection products is 35 years as against average age of 45 years for a saving products, so that’s a huge opportunity for all of us.

Why is the proportion of insurance premium to the total GDP coming down?

Razdan: If you compare to 2010, the same products are now being sold at much cheaper rates, almost 25-30 per cent lower than before. You cannot ignore the fact that life insurance, due to regulatory changes, has become more affordable, amenable, and easy to access. One has to look at insurance not as a ratio to GDP but in terms of number of households. A large pool of the population owns insurance but they don’t have adequate insurance.

Kannan: I think of the phase of 2010-2014 as a period of recalibration. There was a lock-in stipulated and rightly so, products were refiled. Instead of looking at premium as a metric, we can also look at sum assured as a percentage of GDP, that has been steadily growing and we are at about 75 per cent. The aberration was caused by a deliberate need to recalibrate the industry and since then it has been growing at a good rate. Obviously when the prices are lower, the average ticket size suffers.  

Chugh: Private sector has been growing faster so if you add nominal GDP to be about 10-12 per cent and growth of private sector is upwards of 14 per cent but Life Insurance Corporation has been a little slower. Of course, it has a large base and it is difficult to grow on such a base as just one company. There are segments that have slowly gone away from us but there are also some segments that we are not addressing. Today, there are 30,000 people every day that touch the age of 60 and we don’t sell to them. So there is also a segment that is walking away from us. Also, there are very few people now who have financial planning, so we see that as an opportunity. On one end we need to tailor products for pension, but we also need to look at how to increase the term component in the industry. We need to look at how we can bring value creation.

Nautiyal: There was a period where a lot of sales of unit linked insurance plans (ULIPs) had happened because of which the penetration level had increased but then the regulator stepped in and course correction happened. There were a spike and then the regulator stabilised those highs. Last three to four years, the industry has grown at a very constant rate.

Dahiya: Within the next 10 years, India will be number one in the world in sum assured to GDP. If you look at the growth over the last eight years, we have at least doubled the ratio of sum assured to GDP. We were at 30 per cent and as of today, we might be at 80-85 per cent, so we are rapidly going through a sea of change. Our job is not to collect premiums but to provide sum assured. So it’s the sum assured to GDP ratio that really matters and that is the impact that our industry is having on the country. I am confident that in 10 years, India will be the number one in terms of sum assured to GDP, much higher than the US.

There is still a perception that there is mis-selling in the insurance industry. Your comments?

Badami: For a long time, life insurance was a push product because it was a complicated product so someone had to go out there and sell the product. The new product regulations, technology and design wherein people are able to compare and understand features is leading to a pull effect. We may not be fully there but it is happening. In life insurance there is a lack of understanding but there have been controls put in by the industry. We do verifications, audits as well as triggers are put in place.  

Chugh: There has been a marked reduction in mis-selling and there has been a downward CAGR (compounded annual growth rate) of almost 22-23 per cent every year in that. There was a phase where everybody mis-sold, the regulator put trust in the insurance companies and all of us went haywire trying to hit the four per cent. That is an issue of the past but the stigma still stays. There are issues around liquidity which people later realise and is the single biggest reason why people talk about mis-selling.  

Razdan: Wherever money is involved mis-selling does happen. The best way to understand an industry is to read complaint letters and they used to be all about mis-selling as a result of the product design. Now there are barely any complaints about it. The entire industry got coloured but it was certain pockets of distribution that were mis-selling against which the regulator took a hard stance. There is significant reduction now.

Kannan: Mis-selling doesn’t help us. We are not getting any benefits out of it and it destroys value for shareholders. So it is not something companies should be encouraging. In fact we should come very hard on mis-selling with the help of the regulator and that is what has happened. The ultimate proof is the persistency movement in the past five years with renewal premium coming back. If a mis-sale has happened, people will not pay renewal premium.

Dahiya: There are some products like pure protection where there can be no mis-sale. Clearly, product quality has been improving, customer persistency has been improving and that is the way to go. The one question as insurers, regulators and individuals we always have to ask about a product, is whether we are doing the right thing and not just for ourselves.