Sales and Distribution

Insurance Ecosystem: Taking Insurance to the Masses with Customer Centric Approach

‘We cannot stop or control Natural disasters; however, we can arm ourselves with disaster preparedness to mitigate the loss.’

*Need realization –

The inadequacy of insurance coverage becomes quite apparent whenever any disaster strikes. Human response to natural calamities requires proper planning and emergency management. India has not made much headway on disaster management as it lacks preparedness which is seen time & again in the aftermath of calamities. In the 2013 Uttarakhand floods, the fury of nature struck the hill state. Similarly, in 2014, the J & K floods had a devastating effect causing losses of approximately 5500 crs. The 2016 Chennai floods disaster dismantled the lives of many citizens & the insurance claims amounted to Rs.4800 crores whereas the actual losses accounted for approximately Rs.15000 crores. The recent disastrous floods that struck ‘The God’s own country’ brought Kerala to its knees. The total estimated loss amounted to Rs. 35,000 crores out of which the approximate admissible claims amounted to Rs. 5,000 crores. This clearly portrays a huge customer base which is largely uninsured & underinsured.

Insurance Ecosystem

*Challenges –

· Lack of instant gratification – The biggest challenge in insurance is that there is no instant gratification for the customer. After all, it is a promise to reinstate or pay losses in case there is any mishap.

· Challenge of distribution- The current General Insurance penetration in India is less than 1%. This paves a way for immense growth potential. Though a vast population waits to be served, a well-defined strategy to reach out to this population is a must. Much of the demand may not be accessible because of poor distribution, large distance or high cost relative to returns.

· Lack of awareness – The existing level of awareness of the consumers for insurance products is considerably very low. Even the educated customers are ignorant about the various products available & their benefits.

· Perceived to be a difficult subject – Insurance as a subject is perceived to be very difficult for comprehension by the common masses. There are very high chances of misinterpreting the technical terminologies.

As per the current scenario, in the general insurance industry, the customer will be the single most important factor driving changes. For insurers, therefore the critical success factor would be managing the customer. The Indian insurance industry is witnessing a paradigm shift from brick – mortar strategy to click & mortar strategy. Thus, an Insurance company’s ability to attract & retain the customers is a function of not only what it offers but also how it serves its existing customers.

*Opportunity analysis & way forward –

· Customer Value – It is the perceived satisfaction a customer experiences or (expects to experience) by taking a given action relevant to the cost of that action. Typically in Insurance industry, the only point of time where the customers tests or experiences the services of an insurance Company is while buying an insurance policy & at the time of claim. It is essential to have high frequency & low severity products with a lower ticket size for building in the customer confidence. Companies are moving from product centric approach to customer centric approach. It is not important “what” you sell, what is important is “who” you are selling it to.

· Communication & awareness – It is extremely vital that we communicate with the customer by using a language that the customer understands & can relate to. The complexity of the subject must be simplified & easily comprehendible. The customers may then reevaluate their needs & can make a better choice of what he / she actually wants.

· Moving from mandatory insurance to need based insurance products –

Motor Third party insurance is primarily purchased as it is mandated by law.

Few other insurance products like extended warranty / liability policies are either cross sold or the customer is compelled to purchase them bundled with the main product.

However, with the advent of newer & better products available in the market namely Home insurance, Cyber safe insurance, pet insurance etc. we now see a shift in the mindset of the customers. It is the need of the hour that the Insurance companies develop products which are customer centric rather than having distribution driven products.

· Health insurance surge –

According to the Modern Medicare magazine, over the past few years, the health insurance sector has been growing rapidly at 18%-20% p.a., clearly outpacing the GDP growth of the country. Important to note is that it has been the fastest growing non-life insurance segment. The single biggest contributor to growth, is the growth of the vibrant “middle class” of India. This aspirational class is educated and aware. Consumption by the middle class is expected to triple as a share of India’s total consumption over the next 15 years. In order to earn the growth it is important to innovate on two fronts, namely, products and services.

· Penetration & distribution –

Distribution is another key element for any General insurance company. General insurers market various insurance products either directly or through several distribution channels namely Agency, Bancassurance, and Brokers etc. India, a land of 8000 cities & 6 lakhs villages constitutes more than 60% of the population living in Tier III & IV cities/villages or below.

Insurance will be dynamic and will cover end-to-end customer journeys.

• Insurance will be highly customized and relevant to each customer individually

• Interactions will be “phygital” – a mix of physical and digital, though increasingly becoming more and more digital

• Insurers will partner with multiple different service providers to offer end-end services meeting customer needs and not just products

These advances will be a lot more potent as they will have widespread applications across different aspects of the insurance business including sales, underwriting, claims and customer service.

In order to address the penetration challenge, we have a very successful example in insurance industry today.

Bajaj Allianz General Insurance Co. Ltd. came up with a vision to flip the traditional distribution model in the year 2014. It was this insight that led to the vision of an office which resides on a screen i.e. the Virtual office which takes the website to customers’ doorstep. It is an ‘office on the go’ for the employees & the distributors fully functional without brick & mortar.

All the policies are issued through a digital platform with maximum paperless transactions leveraging on technology thereby improving efficiency, reach, service standards, transparency and minimizing the cost for the company.

There is no doubt that the insurance industry will see increased growth, more participation and superior product solutions in the years to come. It is important that the insurers, regulators and government work in close coordination and leverage the immense possibilities that lie ahead keeping a customer centric approach.

*Disclaimer: The views & opinions expressed in this article belong solely to the author & not necessarily to the author’s employer, organization, committee or any other group or individual.



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Note: This article, written by the same author, was also posted on LinkedIn.

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