India’s inherent strengths — a young population, increasing household income and rising education level — continue to give a reason to believe in the long-term growth potential of the country. For the life insurance industry, significant growth is expected in middle-income India, which is expected to exceed 500 million by 2025.
In India, life insurance has played a critical role in aggregating small household savings and redirecting them towards long- gestation infrastructure projects through investment in infrastructure companies and government securities. However, over the past three years, new business premium has declined and the industry has faced significant surrenders. It is time for the life insurance industry to come together and help the consumer understand the true purpose of life insurance, i.e., long-term savings and protection.
Five specific steps that can be taken by industry are: launching consumer awareness and education campaigns, targeting need-based sales in which financial awareness is inherent, helping consumers define ‘long term’ with regard to their life-stage needs, creating greater awareness on life risks and including financial literacy in the school curriculum.
The incentive for long-term savings. To kickstart greater traction for household financial savings, there is a need for tax incentives on long-term savings, which should clearly be different from short-term financial savings. Tax incentives have been a key driver of the life insurance industry, both in India and other markets.
The effectiveness of such tax policies is clear with regard to shifting national savings to life insurance and promoting long-term savings. An additional tax incentive of R1.5 lakh on life insurance and R1 lakh on retirement plans could result in significant growth for the life insurance industry. This will also result in additional flows of R90,000 crore into infrastructure and R2,20,000 crore into government securities by Fy2020.
Rebuilding customer trust. While over the past couple of years, the Insurance Regulatory and Development Authority (Irda) has worked towards creating a framework to win back customer confidence, it is time the industry reconnected with customers in the new year. At every customer touch point, there is an opportunity for greater effort — mandatory need-based sales, transparency in selling processes and documentation, customer-friendly product design and features, more efficient customer service and claims management and, above all, continuous dialogue and engagement with consumers to understand their changing demands. If we improve at every step and aim for ‘consumer delight’, we will do what is