Senior executives from the leading insurance companies reveal details about the changing business scenario & customer preferences:
Post covid there have been many changes in the insurance business scenario. Earlier customers did not actively seek out digital self-service options, while today they want easier and improved servicing choices from the safety and comfort of their homes because of digital disruption.
Samrat Das, COO, PNB MetLife states: “A few years ago, customers were not very keen to buy a term insurance plan. With more competition and superior mortality experience (even excluding the covid effect) firms are now offering lower protection rates and it has been viewed as a chance for greater coverage at reduced costs, particularly by millennials.”
Changing Preferences
The life insurance industry does not have a portability feature in its plans and hence there is no record of customers switching a product from one insurer to other. Health plans offered by life insurers do allow portability, but these plans are fixed-benefit health plans which charge a premium for policy terms or a fixed duration.
Atri Chakraborty, Chief Operating Officer at IndiaFirst Life provides more details: “Since life insurance premiums increase with increasing age, it does not make financial sense for customers to switch from one plan to another at a later age. Most life insurance products are long-term in nature leading to customers not switching from one company to another until it completes its term.”
Products with shorter duration provide guaranteed returns. Samrat shares: “The modern-day customer desires more market information and choice of different financial products, a shorter time commitment, and relatively assured returns. And this has become pronounced due to the uncertainty of future income in the past few years resulting from the covid experience.”
Switching of products
Life insurance premiums increase with increasing age, it does not make financial sense for customers to switch from one plan to another at a later age. Most life insurance products are long-term in nature leading to customers not switching from one company to another until it completes its term.
Atri explains: “In certain product categories like term plans, regular premium paying customers may switch or prefer another insurer purely from benefit arising out of lower premium to be paid for the same sum assured (cover) or in scenarios where the customer faces significant servicing issues.”
Unlike life insurance, customers may switch from one health or non-life (motor, fire, etc) insurer to another based on price advantage, claims experience, and service-related experience. Though there are no metrics for switching, persistency metrics are the key parameters that life insurance companies track to gauge customer loyalty and retention.
Atri admits: “These metrics track the percentage of customers who have renewed their policies (13th-month persistency metric) would measure the number of policies that are active after 13 months. Overall, with life insurers focussing on customer retention, there has been an improving trend in persistency over the last decade.”
Expanding Coverage
Nowadays health insurance plans provide various benefits such as cashless OPD coverage, unlimited restoration benefit, coverage for mental health illnesses and domiciliary treatment, zero deduction on non-medical items, and a high limit for room rent. Due to such benefits, consumers keep researching health plans offering comprehensive benefits along with other benefits such as cashless treatments and guaranteed cumulative bonuses.
Due to rising medical inflation, the cost of healthcare and hospitalization has increased tremendously post covid. Policyholders have realized this and scout for health plans with higher sums insured to protect their financial savings and meet healthcare requirements at every stage of life.
Shashank Chaphekar, Chief Distribution Officer at ManipalCigna Health Insurance says: “Consumers are looking for value-based affordable health cover and more personalized health insurance products and services to address the health needs of today and prevent the financial health burdens of tomorrow.”
Shashank further added: “When it comes to health insurance there are so many factors involved, that people are left overwhelmed and confused. This is where consumers are looking for the health insurance expert who can help simplify the choice of health insurance, provide unique perspectives, and will always be there by their side to access quality healthcare.”
Different Products
Life insurance products serve the entire customer life cycle where events like marriage, kids’ education, and marriage of children and retirement are certain and thus require prudent financial planning. Atri speaks: “Different life insurance products help them to achieve these varied goals at different phases of life. A customer may start with a pure protection plan at a younger age (lower premiums), add investment plans – guaranteed returns or the relatively risky ULIPs, followed over time with a retirement plan, and finally end up with an annuity product.”
Samrat says that recent events have been instrumental in creating a shift in customer preferences towards greater safety and security. Customers now are seeking an enhanced sense of being financially prepared during possible exigencies. Accordingly, we are seeing an increased uptake of guaranteed investments and protection-oriented products.
In the hierarchy of needs, health insurance has become a ‘necessity’ post-covid. Due to the pandemic, people have become more conscious about their health and the same trend has been seen with the rise in buying health insurance policies.
Shashank added: “Not only the aged but also millennials and GenZ have understood that medical emergencies are uncertain and can affect anyone irrespective of age. With rising medical inflation along with inflation of daily commodities and essential items, it has become of utmost importance that one has health coverage for himself and his family to protect their savings at the time of hospitalization.”
Trends
ManipalCigna identified a couple of customer segments where either there are no health insurance products for them in the market or the options are very limited segments such as customers looking for cashless opd cover, customers who suffer from diabetes, hypertension, cholesterol, asthma, and obesity are largely rejected, customers who are planning to avail infertility treatment through IVF or IUI. Shashank comments: “Customers who would like to cover 100% of their hospitalization expenses including the expenses for non-medical Items (consumables) which are largely excluded.”
Samrat speaks: “We are witnessing a trend in which consumers prefer guaranteed returns in an insurance policy. We have observed that buyers usually switch between ULIPs and traditional plans. One clear pattern is that a recurrent buyer’s premium is 35-40% more than a first-time buyer.”
Customer First Philosophy
Customers add diversity to their portfolios based on their risk appetite, financial capacity, and financial goals. IndiaFirst Life does not observe trends of switching but rather diversifying their portfolios through incremental investments. A customer who opts for a ULIP may later add a traditional guaranteed or savings product, which gives assured returns and, if satisfied with the company, at a later date, may opt for pension products as a part of their retirement planning.
As portability does not exist for life insurance there is no record maintained of customers switching. IndiaFirst Life follows a CustomerFirst philosophy and gives a lot of importance to the persistence of policies. As of July end of 2022, the 13-month persistency for the company was 82.75% on the premium number.
Atri added: “The company has undertaken numerous measures to improve 13th-month persistency. Another metric of success of customer loyalty may be measured by the customers purchasing more than one policy from the company. To date, approximately 10% of IndiaFirst policyholders have bought more than one policy from the company.”
New Products & Innovation
ManipalCigna Health Insurance has recently launched ManipalCigna ProHealth Prime which offers innovative coverages that not only cater to hospitalization expenses but also provide solutions to various other ancillary issues including the funding of out-patient expenses that are managed through self-funding by the majority of the Indians. Shashank says: “We are seeing more and more of our customers switch from one product to our newly launched ManipalCigna ProHealth Prime to meet their healthcare requirements.”
Customers also tend to switch plans within the same companies when they want to include any new benefit that their current plan is deprived of. Consumers have become more aware of their existing health plans. Shashank reveals: “Post covid, with rising medical inflation and health insurance companies providing coverage for OPD, room rental, and nonmedical equipment and home care treatments, policyholders don’t want to miss on these benefits and hence switch or upgrade their existing plans.”
Product Cycle
Samrat believes that if a customer has purchased an investment-oriented plan in the first instance with a child’s education in mind, they are more likely to purchase a second plan for retirement or as a long-term investment. As a customer-centric organization, we follow the circle of life philosophy which means that our advisors work with our customers to choose policies that are relevant to their financial goal plans. For example, a customer who wants to save for their children’s academic goals is guided to opt for PNB MetLife Guaranteed Goal Plan – saving solutions backed by guaranteed returns.
In ManipalCigna Lifetime Health plan, customers with an existing sum insured of Rs1 million can port to this plan at a higher sum insured up to Rs30 million without any additional waiting period restrictions on the increased sum insured, whereas in other insurance products one has to serve the waiting period for the incremental sum insured. This is a path-breaking innovation that helps customers to move from existing low-coverage products to this affordable high coverage product.
Age & Geographical Factors
Age is a significant factor in determining the selection of the product category (term, investment, retirement, annuity) and the quantum of cover is linked to the income of the customer. Atri added: “We observe an increasing trend of life insurance attachment products with loans. Customers are covering their mortality risks when they avail loans – home, motor, personal, education, etc, from banks and financial services companies through credit life insurance products that provide life cover during the tenure of the loan.”
Samrat shares: “The rising preference for guaranteed protection plan finds favor among higher income groups and people working in organized sectors. This is also due to the requirement for detailed verification of income, education, and employment. We are also noticing that buyers in the 35-year age bracket show an inclination towards term plans.”
Health is an integral part of the Indian story and the demand for health insurance currently is a financial reality for every Indian. Shashank says: “Affordable, predictable, and simple health insurance products and services can help address consumers’ evolving needs and make it easier for them to access quality healthcare. We have seen the emergence of new customer segments – tier 2 & 3 cities, women, SMEs, and others are also warming up to health coverage.”
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