Photo by Etienne Boulanger on Unsplash
There’s one thing I like about attending conferences online that, in hindsight, have been truly wonderful in this post-pandemic world of ours. That is- there’s very little time to waste going roundabouts to talk about things.
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A pre-pandemic world with physical conferences seemed to have an unsaid rule about social pleasantries and the need for small talk between the speaker and moderator before the actual meat of the conversation began. Believe me when I say that I miss social interactions just as much in this age of social distancing and isolation, but there’s a time and place for everything. There’s no one happier than me when I realised that that need has reduced to the point of vanishing; now that everyone is hidden behind screens and looking forward to the moment one can finally get rid of online meetings to seeing people physically. My favourite thing about online conferences is the lack of interruptions (yes, plural) from well-meaning yet distracting colleagues of ours who have to share a very important life story at that very instant.
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It is quite ironical of me digressing to express my thoughts on digression so here it goes. My impression so far- Muy bien! Thoughts on the topics chosen- very topical, and well-moderated. Kudos to the Conference organisers for a wonderful Day 1.
Here’s my summary of the Session 1 discussed in Day 1 of the First CFA Society India Insurance Conference 2021.
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Session 1: The Insurance Landscape in India- The Race to Digitisation and opportunities and challenges in the face of COVID-19.
Keynote Speaker: Vibha Padalkar | Moderated by: Sumaira Abidi
A solid introduction to the theme of the conference and great presentation by the speaker. The three major themes discussed during this presentation were:
The narrative of how Under-penetration of Insurance was finally changing in India;
The obvious and not so obvious impact of COVID-19; and
The opportunities brought by Digitisation to the Insurance industry overall.
(DISCLAIMER: Please note the industry dynamics are highly specific to the Indian market throughout the summary and is not to be mistaken to apply elsewhere.)
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Under-penetration of Insurance is at an Inflection Point in India:
“Insurance should always have been a business of Risk Transfer…” — Vibha Padalkar, MD & CEO of HDFC Life
There was no better way to put it- the pandemic has finally made more Indians realise the impact of tail-risk events. Be that the realisation of dying prematurely or that of outliving your savings once your main source of income extinguishes, the pandemic has certainly made people consider the merits of transferring this risk using Insurance products. The latter risk is especially more devastating and likelier than the former.
There are many green shoots developing for the industry as a whole, things that are likely to turn into tailwinds over time:
The transition from joint- to nuclear-families among Indians is a development that augurs the need for ageing individuals to realise that there are fewer blood relatives to depend upon in retirement.
The life expectancy is increasing at the same time as the number of people one can depend in retirement is reducing, leaving fewer safety nets for retirees.
Though India’s demographics show a significant “Youth dividend” in the short term , there is a clear indication in the population figures that there will be fewer youth in future to replace the current young workforce. [Check out Figures 2 and 3 in pages 6 and 7 here to visualise the scenario.]
With the rising income standards, the current youth want to sustain their standards well into retirement and are concerned about the rates of return from current Investment products in a lowering interest rate environment all over the world.
While interest rates are falling, inflation seems to be stable or increasing over time, eating away at the inflation adjusted returns from investments.
The number of retail loans are growing at a pace unlike ever seen before- signalling that people have already begun living beyond their means and are at risk of outliving their savings in future.
All of this points to a rapid need to serve the right Insurance products to the masses at an even greater pace than before.
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The COVID-19 Impact:
While one could predict the rise in claims with a little bit of common sense due to the past two Waves of the pandemic, well-managed companies are not really worse off due to them. Sure, the number of claims may increase briefly at the peaks, but they restore back to normal levels soon after. Thanks to significant advances in actuarial analysis using more unstructured data and to the digitisation of India, preemptive planning for difficult times was already done even if it wasn’t foolproof.
It may actually be the other way round- digitisation and the use of more complex data during actuarial analysis has made companies better prepared once the demand for insuring Risks finally picks up in future. More on that below.
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The Race to Digitisation:
Yes, the emergence of the ability to analyse previously unusable data has transformed the way Insurance business works in India. So has the requirement increased for skilled workforce that can actually analyse such data and convert it into useful insights.
There was lots of detail covered but here’s the summary:
Insurance Sales can now be monitored for unethical mis-selling and for fraudulent registrations.
The sales process can be streamlined to target customers based on their specific needs. So can insurance products be customised for individual needs.
Understanding the customer better also reduces the problem of Adverse Selection by using better Artificial Intelligence/Machine Learning technologies as explained here.
By combining personal medical data with other customer generated data for analysis, the likelihood of processing claims by the insurers can be better estimated. This reduces the premiums paid by customers and by the insurers to re-insurers.
My job was actually easier to condense all of the information because of a really well-organised and lucid presentation and the following Q&A section by the moderator.
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I hope you found this summary useful. To read more of my impressions, head over to my Blog page and search for #IInC21.
Auf Wiedersehen!