Insurance Industry is far away from creating true customer delight

Getting the distribution model right is the critical issue for the life insurance companies, feels MD & CEO of IndiaFirst Life Insurance, P Nandagopal.

The life insurance industry is going through a rough patch. Do you see FDI in insurance would help the sector?

The primary reason for the difficult phase of the life industry is not FDI. It is something to do with the distribution structure. The industry must get its distribution model right to reduce the acquisition and operational costs; without which it cannot add customer value and would keep consuming capital. FDI may temporarily address the supply side constraints but it does not help find a solution to the demand side issues.

Do you see the scenario improving in the next few months?

I dont think the situation would improve in this financial year.

Will this lead to consolidation in the life insurance sector?

Consolidation is inherent in the free market dynamics. Consolidation happens during good times and bad times. The current period being one of the toughest, some may feel like moving out to greener pastures if any are left out.

Many insurance companies have resorted to cost rationalisation measures in the last 12-24 months. What steps has your company taken?

We are one of the most cost efficient companies in the industry thanks to our distribution and operational model. We believe we can further reduce costs by leveraging it. We have a major IT initiative in the offing that would hopefully reduce our operational costs further significantly.

There has not been much product innovation in the last few years. What are the new products you foresee coming into the market?

Innovation is multi dimensional. It need not be just product related. I believe real innovation is in creating unique customer experience. The industry is far away from creating true customer delight. Those who would address this gap would emerge as winners in the long run.

There have been reluctance to provide annuities under pension products. What is the difficulty?

Its not difficult at all  but its compelling. A customer to buy both savings and annuity plan from the same provider restricts his choice. It may be that some companies are good at managing the accumulation phase cash inflows while others may be good at managing the annuity phase outflows. In an open architecture environment, compelling the customer to buy two distinct products from the same provider is neither logical nor desirable. The problem of limited availability of annuity options in the market can be addressed through a mandatory quota system as in the rural business.

Ritu Kant Ojha
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