Your money: why the life insurer must be a trusted partner for its customers
This is an industry focused on social services where the value of an insurer is not measured solely by the bottom line.
By Tushar Chatterjee
Insurers are sometimes called “Actors”. There are therefore 24 players in the life insurance sector and around 40 players in the non-life sector. However, it is not as if these entities are in a competition and their main goal is to win. The insurance industry is not a space to be so playful. This is an industry focused on social services where the value of an insurer is not measured solely by the bottom line.
Here, what matters most is claims settlement, persistence and solvency. If these are properly taken care of, profit will come one day. The maturity of the industry is judged by the insurance penetration rate and insurance density. Nowadays, the protection gap of an economy is also measured to assess the efficiency of the life insurance industry. In the life insurance business, it can take 10 to 12 years to break even, and the valuation excess can only happen after that.
Long term contract
The life insurance industry is an industry where the contract between the insurer and the insured is of long duration; say 25 or 30 years. In a whole life insurance policy, the contract continues until the insured life reaches the age of 99. The person who took out a contract at the age of 30 is no longer the same person when he is 55 or 70 years old. At 30, the young client is afraid of dying prematurely. At 60, he is afraid of living too long in case he has not saved enough for the golden age. At 80, he may not have anyone to take care of him.
Are insurers aware of changing financial needs that can possibly be met by another life insurance policy? Everywhere, the role of life insurers is changing. Today, life insurers are supposed to improve the quality of life of the customer.
What does a man need growing up? He needs a trusted friend to suggest how to manage the risks that arise at different stages of life. Life insurers must play this role. If the insured life has been alive for a long time with good health, both the insurer and the insured benefit. It is not enough to win a customer. The insurer who stays with customers as a trusted partner is the real winner. It is more important to remain a partner of the client in her life course until age 65 or even beyond.
At the age of 25 or 30, the client may be encouraged to visit health clubs and adopt a healthy lifestyle. Consultations with dieticians can be arranged at periodic intervals, so that the insured person develops the habit of eating healthy foods. Wearable devices can help the insurer to continuously monitor the insured’s health parameters. Client can be enrolled in parenting sessions as these are useful life skills. Later, he can be advised to take out an insurance policy that can cover the children’s future school expenses. To make all of this happen, insurers can partner with various service providers like fitness clubs, dieticians, edtch institutions, etc.
If the insurer can become a partner instead of just a player, it can acquire Customer Lifetime Value over time. It never happens by chance. The insurer must be in contact with customers, with or without the help of technology. But new digital tools like the ecosystem and application programming interfaces (APIs) are creating new partnerships everywhere. Insurers and insurance customers have everything to gain from these digital applications.
The author is an insurance industry analyst
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