1 Indian Actuarial Profession Serving the Cause of Public Interest27th India Fellowship Seminar Topic: Increasing the share of protection business – promise and pitfalls Guide’s name: Abhishek Saraf Presenters’ names: Kashvi Jagnani Satyavani Cherla Khalid Ahmad Date: 1-2 June,2017 Mumbai Indian Actuarial Profession 1 Serving the Cause of Public Interest
2 Indian Actuarial Profession Serving the Cause of Public InterestAgenda Macro-perspective Protection landscape – watching out for the pitfalls Proposed solutions – fulfilling the promise Conclusion Indian Actuarial Profession 2 Serving the Cause of Public Interest
3 Protection – an unfulfilled promisedCAGR: 11% Increasing protection gap Bridging the Gap Social perspective Higher purpose Economic uplift Financial inclusion Untapped opportunity Lack of substitutes Source : Report on Mortality Protection Gap by Swiss Re Sum assured to GDP: 55% for India versus 150% to 250% for developed markets Indian Actuarial Profession 3 Serving the Cause of Public Interest
4 Protection – a macro overviewDemographic dividends Changing aspirations Nuclear families Higher liabilities Sedentary lifestyles Social security Economic development Financial inclusion Health care spends Purpose of insurance Customer centricity Social perspective Untapped opportunity Lack of substitutes Neglected category Life insurance industry 4 Indian Actuarial Profession Serving the Cause of Public Interest
5 Indian Actuarial Profession Serving the Cause of Public InterestAgenda Macro-perspective Protection landscape – watching out for the pitfalls Category view Stakeholders say Proposed solutions – fulfilling the promise Conclusion Indian Actuarial Profession 5 Serving the Cause of Public Interest
6 Indian Actuarial Profession Serving the Cause of Public InterestWhat’s covered under protection? Focal lens: Pure term Narrow with heated competitive space Standard: + Health High impact with increasing activity Protection View-finder Telephoto: + Riders Incremental value to policyholders & insurers Wide angle: + Group Expanding the horizon Fish eye: + ROP Scalable model or a distraction? Indian Actuarial Profession 6 Serving the Cause of Public Interest
7 Pure term Non-par protection offers higher margins…. Wait… Really??Customers – savings or protection? Impact of competition? Mortality profits ? Investment and loading profit? Lapse Profits ? So where do the margins really rest? Distributors – are they interested? Indian Actuarial Profession 7 Serving the Cause of Public Interest
8 Health Where’s the play for life insurers?Health = Indemnity: ~95% share Hospital cash Is fixed benefit scalable? Vector based diseases Incidence Surgi-cash Competition from GI/ SHI? Capabilities on high incidence? Multiple Critical Illness Investments in creating a market? Disease specific Claims management? Impact Building scale on a fledgling category? Indian Actuarial Profession 8 Serving the Cause of Public Interest
9 Riders Who sells it anyway?...... Caps on sum assured and premiumCumbersome onboarding Caps on sum assured and premium Distribution interest? Success stories: Korea: LEGO – build your protection blocks Malaysia: High attachment rates Online: Encouraging recent trends Classification Singapore example Need to re-look at regulations and onboarding process Indian Actuarial Profession 9 Serving the Cause of Public Interest
10 Group Making financial sense in group? Hyper-competition?Negotiating strength of distribution Low margins Higher Statutory profits – scale? Credit life offers good mortality experience Restrictive definitions and high solvency High capital requirements Indian Actuarial Profession 10 Serving the Cause of Public Interest
11 Indian Actuarial Profession Serving the Cause of Public InterestReturn of premium Is this protection or not? Alignment Customer: Survival benefit Insurer: Higher ticket size Distributor: Higher commissions Is it really protection? PV of mortality claims cost/ PV of total claims SA to annual premium ratio Measure Indian Actuarial Profession 11 Serving the Cause of Public Interest
12 Indian Actuarial Profession Serving the Cause of Public InterestAgenda Macro-perspective Protection landscape – watching out for the pitfalls Category view Stakeholders say Proposed solutions – fulfilling the promise Conclusion Indian Actuarial Profession 12 Serving the Cause of Public Interest
13 Indian Actuarial Profession Serving the Cause of Public InterestInsurers The insurance market place is….. ….Hugely competitive and facing significant challenges ULIP profitability impaired due to cap on charges; Par profitability curtailed due to gate Non-par protection - Higher margins; low interest rate sensitivity; Underwriting profits; Higher EOM limits Non-par savings - Higher margins, but sensitive to interest rates and ALM risk Indian Actuarial Profession 13 Serving the Cause of Public Interest
14 Distribution ….and the rewards are not enoughSelling protection is too much effort….. ….and the rewards are not enough High bargaining power Low earnings Cumbersome on-boarding Health: Medico-legal lingo? High productivity feasible? Why take the effort in retail protection? Indian Actuarial Profession 14 Serving the Cause of Public Interest
15 Customers ….Based on life-stage and customer needsExisting customer segmentation is….. ….Based on life-stage and customer needs Do not recognize the importance of early savings Protection for spouse Securing future for child Safeguarding against critical illness Planning for life goals - children (marriage/ higher education etc.) Generating monthly income to maintain lifestyle Safeguarding health Broad-brushing customer segments stifles innovation Indian Actuarial Profession 15 Serving the Cause of Public Interest
16 Indian Actuarial Profession Serving the Cause of Public InterestAgenda Macro-perspective Protection landscape – watching out for the pitfalls Proposed solutions – fulfilling the promise Conclusion Indian Actuarial Profession 16 Serving the Cause of Public Interest
17 Indian Actuarial Profession Serving the Cause of Public InterestValue proposition for key stakeholders So, what it is that the insurer needs to do? Connecting and sharing information Agility Cost and Speed Personalization New business models Distribution Regulatory / Government enablement Creating a digital eco-system Spreading awareness BARRIERS Low awareness for protection – people don’t see it as the essential product that it is Savings oriented mindset We don’t like to talk about dying Cumbersome onboarding process Medical underwriting Indian Actuarial Profession 17 Serving the Cause of Public Interest
18 Spreading awareness Insurance industry/ Intermediaries/Regulator/ Government Social media Technology Customer engagement Dedicated desks – retention of business Agents’ training Caution against mis-selling Financial literacy and risk awareness Tax advantages Informed decisions Grievance redressal Indian Actuarial Profession 18 Serving the Cause of Public Interest
19 Indian Actuarial Profession Serving the Cause of Public InterestRegulatory / Government enablement Higher Commissions Higher EOM Minimum Death Benefit E-Commerce guidelines Other areas Risk management – mitigating adverse selection and frauds Data repository: reducing information asymmetry Data analytics support: reports, risk flags Accountability for partners: medical network, TPA, distribution Legal framework for action against frauds Separate tax benefits for protection Reducing service tax rates – GST notwithstanding Product related relaxations Use & File for simple protection products Simplifying terms and conditions for health products, death benefit definition etc. Re-look at quota share norms Product regulations Riders: removal of caps, re-classification Group: pricing flexibility, widening definitions, solvency norms PMJJBY: Experience based pricing Allow innovative products – 80 D utilization, health + savings Indian Actuarial Profession 19 Serving the Cause of Public Interest
20 Distribution Dedicated channels – Protection salesforceCommon service centres / Point of sales Microinsurance channels – more needs to be done NGOs / MFI / Self help groups Leveraging digital sales Training initiatives for intermediaries Indian Actuarial Profession 20 Serving the Cause of Public Interest
21 Indian Actuarial Profession Serving the Cause of Public InterestPersonalization There is a need for….. Focused approach to manage key customer needs Risk takers Early adopter of technology Price sensitive Don’t know where to begin Price sensitive Recognize value of insurance Least price sensitive Risk averse Financially confident Not thinking about life insurance Late adopters Mistrustful of financial instruments Focused on securing worry free retired life There is scope for reaching out to….. Specific micro-segments Daily/Monthly income in absence of bread winner Key person insurance for business continuity Avenue to grow household savings Additional income Small savings Protection Wealth accumulation Health safeguard Pure protection Indian Actuarial Profession 21 Serving the Cause of Public Interest
22 Creating a digital eco-systemHealth insurance products Care pathway Education & Prevention Screening & Diagnostics Access Care management Payments Definition Engage the consumer and create deeper understanding of a consumers’ personal health Cutting-edge consumer-friendly tools to let a person know if they are becoming unhealthy Providing consumers with virtual and physical connectivity to credible professionals and drugs Interactions with medical professionals, prescribed products (drugs) & services, and self-empowered programs to improve a person’s health Innovations in financial coverage and/or payment programs within healthcare Indian Actuarial Profession 22 Serving the Cause of Public Interest
23 Indian Actuarial Profession Serving the Cause of Public InterestConnecting and sharing information Increased customer engagement through gamification. Gamification has the ability to activate patients, make them accountable for their health choices, and turn them into consumers. Main advantages - opportunity for data collection, integration, and analysis; Boosts the reputation, brand awareness, and customer loyalty for market players and establishes the provider as an innovation leader mySugr is an application for monitoring blood sugar levels to manage diabetes. Through a point collection system, players are enabled to set and reach personal targets. mySugr was shown to improve testing frequency by 10-20%, decreasing blood sugar levels in the blood by %. AIA’s Vitality Program offers 25% upfront discount on policy if health data is shared; Further discounts and rewards (e.g. vouchers and movie tickets) for healthy behavior. Indian Actuarial Profession 23 Serving the Cause of Public Interest
24 Indian Actuarial Profession Serving the Cause of Public InterestAgility Pricing products using innovative analytics to ensure value for money. Identify risks within policyholders based on publicly available data, instead of just data provided by policyholders. Then capture interactions between risk factors and mortality. Open data can be used to determine the correlation between various factors to the likelihood of death, which can then be used to help ensure accuracy in pricing protection products and maximizing underwriting profits. There is a merit in micro-segmentation of customers, even though there is a risk of exclusion. Pricing in this manner may be curtailed by regulatory restrictions and lack of data. Indian Actuarial Profession 24 Serving the Cause of Public Interest
25 Indian Actuarial Profession Serving the Cause of Public InterestCost and Speed Financial advice Providing cheaper and instant financial advice with minimal human intervention, through robo-advisers. Potentially low overheads. Mint is a free personal finance and money management platform and therefore has close similarities with automated life insurance advice and guidance. It analyses all the user’s bank transactions to give them a bird’s eye view of their financial situation and how to improve it. Mint has been able to gain significant scale on a shoestring budget. Mint trusted its 36,000 Facebook fans to promote its services. Underwriting Cutting underwriting and claim settlement cost and times with Machine Learning. This reduces cost and increases consistency in claim processing; results in improved branding and reputation; better customer interaction Indian Actuarial Profession 25 Serving the Cause of Public Interest
26 Indian Actuarial Profession Serving the Cause of Public InterestNew business models Improving efficiency of sales staff Generating real time tailored guidance using voice analytics and customer database. Helps in increasing productivity of sales colleagues. Increased sales through cross sell opportunities and improved customer experience Digital distribution would allow access to new markets without the need for expensive and difficult to establish branch or agency networks on the ground. It could be especially important in reaching remote customers. Kenya’s MPesa, which provides access to payment and deposits via the mobile phone network and now has 15 million customers, more than all of the country’s banks put together Indian Actuarial Profession 26 Serving the Cause of Public Interest
27 Indian Actuarial Profession Serving the Cause of Public InterestAgenda Macro-perspective Protection landscape – watching out for the pitfalls Proposed solutions – fulfilling the promise Conclusion Indian Actuarial Profession 27 Serving the Cause of Public Interest
28 Conclusion Customers Government and Regulator Distribution InsurersThere’s a long way to go….. Strong partnership with each stakeholder needed Customers Government and Regulator Distribution Insurers Creating a win-win for all stakeholders Indian Actuarial Profession 28 Serving the Cause of Public Interest
29 Indian Actuarial Profession Serving the Cause of Public InterestThank you Indian Actuarial Profession 29 Serving the Cause of Public Interest