The pandemic has enabled the transition of life insurance industry from push to nudge. However, life insurance persistency, especially long term, continues to be a challenge. ICICI Prudential Life Insurance’s Mr Asish Rao says brokers, agents and consumers both need to be technologically empowered for ensuring better insurance persistency levels.
Life insurance policies are long duration financial instruments, whether pure protection products or long-term savings products. The life cover under the pure protection products remains in force as long as the policyholder continues to pay the premium. Long-term savings products, on the other hand, enable customers to build a savings pool to achieve financial goals, even as they offer a life cover.
Remaining committed to the insurance cover for the entire duration is important for the policyholder and for this the customer requires a continuous reassurance from the insurance company.
COVID-19 pandemic has also helped in reinforcing the utility of life insurance and has enabled insurance customers to appreciate its importance as a tool for the financial security of the family.
Asia Insurance Review spoke with ICICI Prudential Life Insurance chief of customer experience and operations Mr Ashish Rao about how India fares in life insurance persistency and what has been the trend in India after two decades of liberalised life insurance industry. India currently has 24 life insurers, 23 in the private sector and Life Insurance Corporation (LIC) the sole public sector life insurer.
Insurance persistency
Mr Rao said, “As per the CARE Rating report 2020, globally, the average persistencies for the 13 and 61 month are approximately 90% and 65% respectively.”
Life insurance persistency is a measurement of the number of policyholders who have continued their insurance policies with their insurers. Persistency ratio is an important indicator of the quality of the sale as well as the future growth of the insurer.
Many factors affect the persistency levels, ranging from the prevailing economic environment, quality of the initial sale, product design, customer experience with the insurer and renewal premium collection practices followed by the insurer.
The life insurance industry tracks premium renewal collection for the 13-month persistency, which implies the percentage of policies renewed after a year or the percentage of policies that are ‘active’ and not ‘lapsed’ after a year of purchase of the cover. Similarly, the premium renewals are tracked on 25, 37, 49 and 61 month persistency basis.
The financial year 2020-21 initially saw a drop in the persistency levels of Indian life insurers, as customers faced job losses and salary cuts and families lost their breadwinners - and due to the long national lockdown due to the pandemic.
The moratorium extended to policyholders during the pandemic lockdown to renew their policies also affected premium renewals. However, by the end of the financial year, most life insurers saw a return of policy renewals and the persistency levels also grew.
Still below global average
In January 2021, Insurance Regulatory and Development Authority of India then chairman Dr Subhash Khuntia said, “There has been a steady growth in life insurance persistency but it is not up to expectation. Moreover, this drops drastically when you go to 61 months.”
“We would like all insurance companies to have a persistency figure hovering around at least 90% for the 13 month and as far as 61 month is concerned, all companies should ensure it is not below 65% which is the world average.”
In the financial year 2019-20 only 14 private life insurers reported a persistency ratio of more than 70% for the 13 month and only nine life insurers reported 40% and above persistency ratio in the 61 month.
The persistency ratio of LIC during 2019-20 in the 13 month was 61% while for the 61 month it was 44%. During the financial year the life insurance industry had an average persistency ratio of 67.85% for the 13 month and 38.42% for the 61st month.
This implies that only two-thirds of the policyholders continue beyond the first year and less than half of life policies continue into the sixth year out of an average term of 15 years for a life insurance policy.
Technology has been a big enabler
Mr Rao said, “Beginning 2012 the Indian life insurance industry began leveraging technology to empower both, the agents and the customers as well, to deliver superior customer service across the policy life cycle and ensure better policy persistency levels.”
To smoothen out the process of onboarding customers and also to ensure that they persist with the insurer, the life insurance companies have now progressed to device-agnostic digital platforms to conduct a need analysis and ensure products match the needs of customers.
Digitalisation has made premium payments easy as customers can use e-wallets, internet banking, unified payments interface, direct debit and more to make their first as well as renewal premium payments.
“We have leveraged the digital ecosystem and provided our customers with convenience. Today, we offer a paperless onboarding experience and are able to issue an insurance cover note within five minutes of policy issuance.
“We have recently deployed a speech recognition AI-powered ‘humanoid’ for renewal premium reminder calling, which can call over 50,000 customers in an hour and converse in multiple languages and around 87% of the contacted customers agreed to renew their covers,” said Mr Rao.
Agents and brokers play an important role
To ensure that the policyholders remain committed to their policy for the duration of the cover, it is important to match the insurance cover to the needs of customers.
This can happen only if the life insurance agents/ brokers understand the specific and unique needs of each customer and offer appropriate solutions for their specific requirements.
Digital platforms have transformed the way life insurance is sold. Digital brochures, multilingual product videos and the ability to resolve product queries go a long way in enabling customers to understand products and their features better.
While going digital will continue to empower the life insurance distribution network and tip the scale in terms of how to engage and connect with customers, the process of purchasing a life insurance policy has always required a personal face-to face-human interaction.
“Life insurance companies send out regular communication through SMS, email, WhatsApp and stress the importance of remaining committed to the product for its tenure to be able to achieve the purpose for which the cover was initially purchased. It is in the interest of both the customer and the company to forge a long-term relationship,” said Mr Rao.
A pre-pandemic consumer study conducted by LexisNexis Risk Solutions revealed that a large majority of customers (76%) depend on agents to learn about life insurance products before taking a decision. This suggests a low awareness about life insurance and its purpose and a need to strengthen the agency relationship and other sales channels to achieve an optimum level of life insurance persistency.
Mr Rao said, “Life insurance is a unique and powerful license as it enables the fulfilment of the financial goal even in the absence of the breadwinner. Goals can range from building a savings pool for retirement, purchasing a house, child’s education, their marriages and more.”
The distribution networks should also conduct a need analysis and offer relevant products and solutions which meet the life stage requirements of customers.
To boost life insurance persistency in India it is essential for all the three stakeholders - life insurers, agents and brokers, and customers to come together and understand the problems and work out appropriate solutions. A