The resilience of the insurance industry

“Toss me like a dough and watch me rise!” Here, it almost seems as if Chinonye J. Chidolue is referring to the insurance industry of today, which has surmounted every challenge the past year has thrown its way. Insurance has always played a crucial role for people and the economy. However, the sudden heightened consumer demand took it to the centre stage. This meant that the industry had to tread the tightrope between performance and compassion. Whether it was about the customer, distributors, or employees—every stakeholder was addressed with empathy and benevolence.

Being an industry which has risk management at its core, the insurance industry used its experience and expertise to work out risk mitigation measures to continue to deliver on their promise that became extremely relevant in the pandemic year.

Products and pricing: Price optimisation for any risk is primarily achieved through data analysis and forecasting. However, last year, insurance companies had to suddenly evolve and adapt to offer protection against a virus, which did not exist until it took the world by storm! The insurers have done a remarkable job given the sketchy data, need for speed, and consumer expectations leading to an altogether new product pricing methodology. That done, the insurance industry has provided what only they can provide: peace of mind through efficient risk management.

New mindset to settle claims: Insurance companies rose to the challenge and stepped up to support consumers by covering Covid-19 claims as a part of existing policies. While all life insurance products have mortality assumptions, the pricing for these policies was never provisioned from the pandemic perspective. Yet, not a single Covid-19 claim has been repudiated by any insurance company citing any exclusion. The companies did not hesitate to dip into their reserves to settle the claims. As of April 2021, more than 900,000 Covid-19-related claims worth ₹8,642 crore had been settled by insurance companies. Add to this, the turnaround time for settling Covid-19 related claims has been dramatically reduced to further help customers. These are statistics that have even forced the sceptics to rethink.

Seamless customer service: Incorporating protection about Covid-19 to make policies robust and relevant to consumers was just the beginning. To add to the challenges, the lockdown imposed a new way of working, literally overnight. Insurance companies seamlessly transitioned into the digital model to be able to serve their customers across demographics and geographies. Whether it was talking to prospective customers, explaining the products to them, helping them with documentation, finding substitutes for medical tests, working out alternatives to paper processes, claims settlement, and more. For an industry that relied upon physical interaction and documents, the move from paper to paperless mandated new protocols of working. No matter what the obstacle, the industry responded with utmost speed and empathy.

The larger role of insurance: The insurance industry has always helped individuals and families by offering financial protection. Also, the economy of the country has been served better because life insurance companies have moderately absorbed the shock of financial loss and empowered individuals to continue contributing to the economy. Early-stage investors were able to manage their financial commitments like children’s education and loan commitments with ease. At a macro level, insurance companies are prominent institutional investors. From government-led infrastructure projects that help build the country to the stocks and bonds market that propel capital formation, the insurance industry plays an important role in boosting the nation’s economy.

At a time when the nation continues to deal with illness, death, and adjusting to a new normal, insurance continues to provide support at macro and micro levels. While people are coming to terms with the loss of a loved one, insurance ensures a stable financial situation in homes. This does not compensate for the emotional loss, but it helps them tide through the sudden changes by providing security and a sense of certainty around finances.

The industry, over stringent trials, has effectively demonstrated that it is indeed an entity that provides benefits in adversity. As a result, in recent times we have seen insurance gaining awareness, acceptance, and momentum. This trend must continue, and insurance must find its rightful place as a risk mitigation tool. The insurance industry is uniquely positioned and cannot be compared with any other industry in the financial services spectrum. It is the only one that offers a shield against unplanned changes in circumstances.

The path to recovery may not be an easy one, but the industry will continue to play a pivotal role in getting the nation back on its feet.

Views are personal. The author is MD and CEO, IndiaFirst Life Insurance Company Limited.