Life Insurance companies have witnessed a robust rise in digital payment of premium after the Centre's demonetisation move in November last year. Companies claim that the share of digital payments has risen from 55 per cent to 75-80 per cent since November.
Cash shortage and heightened awareness diverted insurance customers towards cashless payment of premium. According to insurance companies including Canara HSBC OBC Life Insurance Company Limited, ICICI Prudential Life Insurance and Reliance Life Insurance Company Limited, digital payment is higher in urban areas where awareness for digital payment is more.
As per Life Insurance Council data, income of new businesses has increased about 25 per cent to Rs 1,75,021.89 crore in FY17 as against Rs 1,38,760.47 crore in the previous financial year.
"Premium payment through the cashless mode has increased sharply. For non-bank insurance companies, at present, 60 per cent of payment has been made in non-cash or digital mode through online payment, e-wallets, etc. This may go up to 80 per cent in the next two years," said Ashish Vohra, chief executive officer of Reliance Nippon Life Insurance Company Limited.
Vohra further explained that even in rural areas and small towns, people are beginning to choose cashless modes of payment for premiums. While it is still not at par with urban areas, it is growing nonetheless.
Bank-run life insurance companies have seen higher growth in premium payment on digital platforms. Insurance companies like the ICICI Prudential Life Insurance claimed that it receives 100 per cent premium through cashless payments. Meanwhile, Canara HSBC OBC Life Insurance Company Limited claims to have amassed 75-80 per cent of their premium collection through digital payments- a trend that has picked up since the Centre's demonetisation move.
Shalabh Saxena, chief operating officer and founder member of Canara HSBC OBC Life Insurance Company Limited said, "We have witnessed about 15 per higher premium collection through digital payment after demonetisation. Overall during 2015-16, around 65-70 per cent of the total premium collection was made in non-cash mode, while it reached 75-80 per cent during 2016-17."
According to the industry, bank-run insurance companies are more aggressive in terms of shifting towards a digital platform as they a ready infrastructure for it. On the other hand, non-bank insurance companies are also pushing towards the cashless mode as it helps them to reduce operational costs.
Saxena said, "In past few years, awareness about digital payments has increased, thereby, pushing non-cash payment in the life insurance sector also. Moreover, cash shortage post noteban has diverted several accounts to switch towards the non-cash mode."