Technology to Drive Point of Sale Distribution of Insurance
Indian insurance industry has come a long way since the privatization of industry in the year 2000. Over the last 17 years, several new models, channels of distribution are experimented, new range of products are launched and the industry quietly adopted the new distribution channels in its quest for reaching out to the masses. Over the years since privatization, insurance industry has made significant progress and the total life insurance premium which was at INR 34989 Cr. during the FY 2000, stood at INR 366943 Cr. during FY 2016.
Insurance Penetration (Total Insurance premium measured as a percent of GDP) for India is at 3.44 percent during 2015-16 as against the global average of 6 percent, which indicates the huge untapped potential for insurance in India. Insurance Density (measured as per capital insurance) for India is at USD 54 as against the global average of USD 600, this indicates the quantum of under insurance in the Indian market.
With the advent of the newer channels like Banc assurance, Brokers and Telemarketing, the significance of agency channel, which was the only distribution channel in the pre privatization era, has been coming down over the years. Despite all these channels of distribution, the insurance penetration of India continues to be low indicating a large section of the population is still uninsured or underinsured.
IRDAI, regulator for the insurance industry has been proactive and continuously engages with the industry and in order to facilitate the enhancement of the distribution reach, IRDAI has come up with new guidelines on Point of Sales distribution recently. The objective of these guidelines is to make the appointment of the Point of sale person simple and allow him to sell simple and easy to understand product to the customers. IRDAI has issued separate guidelines on POS person and POS products.
The POS model opens up a vast new opportunity for distributing life insurance products as the process of appointment of POS and product offerings got simplified. Any FMCG distributor or pharmaceutical retail chain or any organisation having its own distribution outlets can quickly become a distributor of life insurance product by adapting to the POS mode. The insurance company or an IRDAI approved intermediary can impart the training, conduct examination and issue certificate to the POS person to sell life Insurance. Secondly, the Point of Sales person can sell only simple vanilla type, easy to understand products wherein each and every benefit under the product is predefined and disclosed upfront clearly to the customer. Thirdly, most importantly the guidelines stipulate that the policy has to be issued with two working days of receipt of the proposal. In the event of the policy could not be issued, the refund of the premiums collected has to be refunded within 7 days. These service level definitions pave the way for fully digitised, technology driven policy issuance and customer service.
For a huge majority of customers who live in the hinterland of our country, POS models brings the life insurance policy and servicing capability closer to them. With the IRDAI dictum of offering simple, easy to understand products with predefined benefits, the opportunity of missale by the distributor is minimised to a great extent. Secondly, the prescriptions on the TAT for issuance and refund by the IRDAI, will put pressure on the operational process of the life insurers and will necessitate them to go fully technology driven customer interface.
Considering the vastness of our country, a fully technology enabled customer service is key to the success of Point of Sale distribution. A technology driven POS process will enable the distributor, who is located in the remotest corner of the country to quickly issue the policy and to provide speedy customer service. The technology enabled POS system will have multifold effect on the business of life insurance. Reduction in cost, quicker TAT in issuance of policy, superior customer experience and seamless operations are some of the benefits that will accrue to the life insurance companies due to technology adoption in POS.
Adoption of the right technology for POS model is very critical for the success of the POS as a channel of distribution of insurance products. Considering the potential scale in POS distribution coupled with the knowledge levels of the POS person, a simple, easy to use technology driven application which has the capability for scaling up to large numbers becomes a prerequisite. The choice of technology, nature of devices depends on the proposed scale definition of the life insurance company. The technology adopted need to support the POS person in providing the right information on the product and also need to have inbuilt sales tools to enable POS person to close the sale faster thereby improving the quality of sales, which may lead to higher persistency. The technology should provide for easier, smoother and seamless interface to the user, i.e. the POS person in filling the data, KYC compliance and also in fund/premium transfer. With several technologies available, the POS model for distribution can help the life insurance companies in reaching out to the masses at an affordable cost by providing better customer experience.