Sanjeeb Kumar, CEO, General Reinsurance AG, India
Sanjeeb Kumar is the CEO of General Reinsurance AG (Gen Re), India. He has over 30 years of experience in the insurance and reinsurance industry, in the areas of product management, pricing, underwriting, reinsurance, regulation, finance, actuarial and risk management. Prior to joining Gen Re he held management roles at Aviva, Aegon, Max Life and LIC. He is a member of the governing council of the Institute of Actuaries of India and was the President of the institute from 2016 to 2018.
TDI: A well-known industry commentator, Stephan Binder, the author of Life Insurance in Asia; Sustaining Growth in the Next Decade, has observed that “the key challenge for insurers is to fully recognise the different needs of customer segments, and then evolve their business models, product suite, and channel capabilities accordingly”. Can you give some examples of these changes in India, and how Gen Re and others are responding to them?
Sanjeeb: I agree with this observation but it’s important to remember that tailoring products to particular market segments first requires the identification of that market segment. In India, the penetration rate of life and health insurance is still low. However, given that about two thirds of the population is under 35 years of age, and with relatively little coverage, this market offers huge growth potential.
It’s also early days in India in terms of channel capabilities. The online distribution of pure protection products directly from an insurance company’s website commenced in 2009. By 2017, the regulator had begun allowing more liberalised (untied) distribution channels, such as bank tie-ups with more than one insurer and ‘Insurance Marketing Firms’ to be established.
On the product side, some reinsurers in India are actively involved in designing and pricing innovative products and underwriting solutions. For example, guarantees in unit-linked products, unitised with profit products, and universal life type products have come from reinsurer collaborations. Indian insurers also did not have experience developing critical illness products and online term assurance products. The global expertise of reinsurers has proven crucial in the design and pricing of such products for the digital age.
TDI: India has the unusual status of being both a market of scale and youth (in contrast to China, Japan and many other Asian markets).
i) How is this impacting life and health insurance in India?
Sanjeeb: Yes India has a huge and relatively youthful population, but the awareness and appreciation of insurance is low, so the challenge for the industry is to first educate the public about the value of life and health insurance, and then use this as a foundation to engage in the deeper innovations (market segmentation, O2O services, public/private partnerships, etc).
Traditionally (before 2010), the concept of buying pure protection life and health insurance policies was very difficult to explain to the Indian population, and hence savings products were in great demand. Now protection-orientated products are growing in popularity due to recent events and regulatory encouragement.
Similarly, pure health insurance penetration has traditionally been very low, both in terms of uptake, as well as the adequacy of amount of cover. But with rising medical inflation (running in the double digits), and more and more nuclear families thanks to workforce migration and urbanisation, dependence on family support has been reducing, resulting in an increased demand for insurance cover.
ii) What do you think is the next phase of development for online insurance in India?
Sanjeeb: The next phase will focus on distribution and innovative product design. Some new companies like Acko General, Digit Insurance and COCO (former DHFL Insurance), have appeared with new products like smog insurance to cover the onset of diseases such as bronchitis and asthma in large Indian cities that suffer from pollution.
Another example is the increasing popularity of disability insurance arising from the fact that many self-employed Indians don’t have employer contributed social insurance, and therefore suffer a double loss if hospitalised (treatment costs and loss of income). The solution in this case, offered by PayTM in collaboration with ICICI Lombard, covers the cost of treatment plus the loss of income that arises from hospitalisation, and premiums can be paid on a weekly basis which makes it accessible for self-employed Indians.
The ever-increasing availability of customer data from mobile devices means the possibility to customise product offerings going forward is vast, but it will be a challenge for insurers whose systems and processes are not flexible enough to absorb such ongoing rapidly emerging changes.
TDI: India’s insurance industry is often compared to China as a market of similar scale and penetration rate. However, India has just 24 life insurers and 39 non-life insurers compared to China’s 92 life insurers and 84 non-life insurers. Additionally, Indian InsurTech is still overwhelmingly focused on distribution. Why do you think this is the case and will we see intensifying competition and broadening efforts at innovation in the coming years?
Sanjeeb: Yes, India has a lower number of life insurers compared to China, but most of the global, leading life insurers are present in India. Life insurance operation in India was traditionally a long-term business with a huge upfront capital requirement for new entrants. Yet, given the huge market potential and expected adoption of ‘risk-based capital’ going forward, I expect more players to enter, particularly in health and general insurance. In fact, non-life insurers have already seen a surge during the last three years with many newer players coming in. Given that 39 players are already in, it is still a significant number given their nationwide presence either through branches or online channels.
In terms of the disproportionate number of distribution-orientated startups, I think this is reflected on a global basis. It is simply easier to enter the market as a broker than to develop a technology solution for insurers that is significantly better than the legacy (and already deployed) alternative. In India’s case, the fact that we are an early stage market with room to grow makes a broker-based model even more attractive.
TDI: An often overlooked vertical within digital insurance is new product development. Although investment-linked products have been the biggest driver of growth for life and health insurers across Asia, insurers are now being encouraged to focus on protection-orientated products (annuities, critical illness, and health products). How can Asia’s insurers make this transition, and can you give some examples of product innovations in India?
Sanjeeb: In recent times the new digital channels have mostly consisted of e-commerce companies and digital payment providers such as Amazon, PayTM, Mobikwik, etc. Some insurers are also exploring specialised and dedicated new products to cater for the needs of the customers on these digital channels. In my view, it’s just a matter of a couple of years until the growth rate of digital insurance products will be higher than the growth rate of traditional products on legacy channels, such as bancassurance. During the last couple of years the industry, and particularly the leading insurers, have also changed their distribution strategy to increase the share of protection products and ultimately the profitability of the industry. Although this will not be an easy transition, recent developments have certainly helped to highlight the need for protection-orientated life insurance products.