The entry of private players in life insurance over 20 years ago changed the contours of product sales, with the emergence of a multi-channel distribution architecture, from what was earlier dependent on individual agents. It threw open the gates for alliances and partnerships and facilitated new ideas, skills and opportunities. It also allowed life insurance companies to reach out to a larger set of prospects, drive penetration and scale up.

Alliances enable companies to leverage strengths, gain insight into the local market place and understand customers better. Alliances also have the power to change industry paradigms, usher in healthy competition and provide customers with a better value proposition.

The multi-channel distribution architecture enabled life insurers to provide customers with the flexibility to choose their most preferred route of interacting with their life insurance service provider. This new model expanded to include web aggregators, insurance marketing firms, and corporate agents such as digital/fintech companies, microfinance institutions, non-banking financial companies, and banks (referred to as the bancassurance channel).

More recently, this included small finance banks and even e-commerce players. With growing aspirations, nuclear families and a mobile population, the need to provide financial security to family members and dependents have increased. Also, a majority of India’s population lives in rural geographies. Considering that life insurance caters to the fundamental needs of customers i.e. protection and savings, it is crucial for life insurance to be accessible.

To provide wider access to customers, life insurance companies stitched new partnerships with large banks, small finance banks, mobile wallet companies and others. Banks are the first point of contact for an individual conducting a financial transaction and they are their trusted partner. While most insurance companies already have such alliances, they continue to expand.

Technology powering depth and reach

The sheer convenience offered by mobile wallets is unmatched and more so in these challenging times where social distancing has become the new normal. These partnerships, backed by new-age technology, including advanced digital platforms and a simple delivery mechanism, are enabling insurers to reach out to a wider customer base for their products and services in both existing and under-penetrated markets. Using technology to dive deep into the customer psyche and preferences has enabled life insurers to design relevant products and simple delivery mechanisms.

In turn, it has given the partners the flexibility to choose the most appropriate products best suited to the needs of their customer segment. For instance, companies offering mobile wallet can offer small-ticket sachet products, which can be purchased off-the-shelf by customers.

The insurance regulator, in its efforts to enhance penetration, has permitted fintechs to work towards expanding the distribution landscape and include new-age platforms such as e-commerce sites to offer life insurance products to their large and expanding customer base. This could prove to be a game-changer for the life insurance industry, considering the popularity of these platforms. The penetration of telecom services, high-speed internet, affordability of smartphones and rising financial awareness open up a whole new front for life insurance players.

Despite the rapid adoption of technology, human-to-human interactions will continue to remain a key component of the industry's distribution model. Agents will continue to co-exist and play a pivotal role in reinforcing the importance of life insurance. As customer behaviour evolves and the use of data and predictive analytics grow, agents would need to adapt to the changing business dynamics. At a time when physical interactions are a challenge, life insurance companies continue to train their agents and distributors and equip them with various collaboration tools so that they are prepared to operate in a virtual world without compromising on the human touch.

As insurance companies seek to build partnerships and explore alternate distribution channels, they will explore new opportunities to increase value proposition, reach out to untapped markets and expand customer base. This is possible only by forging alliances.

As we know, life insurance has a larger societal role to play in ensuring families have financial security, especially in times of a pandemic. The need to provide for one’s family cuts across various strata of society and, these alliances are allowing the industry to penetrate deeper into the hinterland, thus emerging as a powerful way to drive financial inclusion in the country.

(The author is chief distribution officer at ICICI Prudential Life Insurance Company)

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