Improve Persistency in Life Insurance with Technology

India has a population of around 140.76 crore. India has a Life Insurance penetration rate of 4.2% based on the Economic Survey 2022-23. 3 out of 100 people have a Life Insurance policy in India.

The 61-month persistency ratio of Life Insurance stands above 50%, encompassing four life insurers, including LIC of India. However, most other insurance companies exhibit persistence ratios ranging from 30% to 40%. Essentially, this indicates that only approximately 40% of policies are maintained beyond five years, considering an average policy term of 15 years.

We researched problem statements and came up with the key problems.

Key Problems for Persistency in Life Insurance

Limited communication with Policy Holders after sales.

• Insurers' lack of communication with policyholders leads to a failure in sharing updates and policy values. Consequently, this breakdown in communication results in missed opportunities for insurers to engage in cross-selling and upselling to their policyholders.

Generic engagement with the customers.

• While some insurers are making efforts to communicate with policyholders, their approach is often generic and lacks personalization. This uniform communication fails to capture the individual interests and needs of customers, leading to a loss of customer engagement and interest.

Market has high interest paying instruments

• In the past, there were limited options available to provide substantial returns. However, the Indian market now offers a plethora of high-interest paying financial instruments, including Mutual Funds, Bonds, Equity, NPS, and PPF. As a result, policyholders often compare their existing policies with these alternatives and may find them more valuable for future investments.

Purchased in peer pressure

• At times, policyholders purchase insurance policies based on personal relationships with agents or by comparing themselves to their peers in social circles. However, this decision may not always prove valuable to them in the future.

MIS selling of insurance etc

• Insurers sell policies that are unsuitable for the policyholder, leading to a lack of perceived value by the policyholder in future.

Person is missing / unreachable / out of the country / dead etc

• Insurance companies face challenges in tracking policy renewals when the policyholder is untraceable, unreachable, has forgotten about the policy, become an NRI (Non-Resident Indian), or even passed away. These circumstances make it difficult for insurers to facilitate the renewal process, leading to potential issues in maintaining policies up-to-date.

Government policy changes

• At times, the government introduces policy changes related to taxes and value, which can impact policyholders' perception of the policy's value negatively.

How can Technology solve such problems?

Impactful Communication & Engagement

• Customers can now receive a wide range of personalized value propositions, including information about policies, new products, and company updates, all tailored specifically for policyholders. With the advent of Modern GeneratiAI, communication can be finely tuned for each policyholder persona, and users can be effectively segmented based on their characteristics. This advanced approach to communication holds the potential for significantly improving engagement and fostering better communication between customers and insurers.

Gamification in the journey

• Life insurance policies often have long-term durations, and there is an opportunity to gamify the entire renewal, engagement, and sales journey. For instance, when someone purchases their first life insurance policy, it can be celebrated as a milestone in covering their family's financial protection. Upon renewal, a message could convey that they are now further secured, creating a sense of achievement.

• By incorporating gamification elements, the consequences of not renewing a policy can be illustrated in an interactive and engaging manner, motivating policyholders to take timely actions. The use of technology is instrumental in implementing such initiatives effectively.

• Apps like Google Pay have successfully demonstrated how gamified interfaces can enhance user engagement and drive positive behaviors. By adopting similar strategies, life insurance companies can create a more enjoyable and rewarding experience for their policyholders, leading to improved customer satisfaction and long-term relationships.

Plugable virtual rewards

• Indeed, every user has unique hobbies, preferences, and dislikes. By tailoring engagements based on the specific persona of each user, it becomes possible to foster a habit of using the product. For example, providing a fitness insights app alongside insurance for health-conscious users, offering a Meditation app for those seeking relaxation and mindfulness, and introducing a digital health care app for individuals in need of regular checkups.

• By offering such personalized products, users are more likely to develop a strong affinity towards the brand, leading to habitual usage and increasing awareness and appreciation of the insurance policy. This approach enhances the overall user experience and strengthens the relationship between the user and the brand.

Comparison with the high-interest paying financial instruments

• Insurers can regularly communicate the distinct advantages of Life Insurance when compared to high-risk investment instruments. For instance, while high-interest products do not offer life risk coverage guarantees, they also carry higher risks. In contrast, Life Insurance remains stable, as the promised interest remains the same regardless of market conditions, providing a secure and reliable option for policyholders.

Identify the best fit

During the sales process, technology can play a crucial role in identifying the most suitable insurance product for the customer. AI can analyze the customer's persona, enabling it to suggest the best-fit insurance plan that aligns with their unique planning requirements. Moreover, technology can recommend insurance policies that cater to the customer's long-term goals, ensuring a more personalized and effective approach to meeting their needs.

Reach out to unreachable person

• Utilizing technology, insurers can proactively connect with policyholders by leveraging various public and government data sources. In contemporary times, government and public APIs offer valuable resources that allow insurers to identify policyholders by extracting relevant information from social media platforms, public databases, and government sources. This data-driven approach enhances outreach efforts and facilitates more efficient communication with policyholders.

Omni Channel Communication

• In modern times, a multitude of digital communication channels have emerged, providing extensive opportunities for reaching customers compared to the past. Channels such as Whatsapp, SMS, Email, Social Media, Mobile App Notifications, Browser Push Notifications, among others, offer diverse avenues for effective communication. Utilizing these channels, insurers can reach out to customers through the most suitable and preferred methods. With the help of advanced AI technology, insurers can even predict the optimal timing to contact customers, ensuring the messages reach them at the most opportune moments. This multi-channel approach and AI-driven insights lead to enhanced communication and engagement with customers.

Empowerment of Agents / Bancassurance

• Empowering agents and bancassurance through technology can greatly enhance customer service from the initial sales stage to policy maturity. Agents can have their personalized websites to showcase offerings to customers and generate leads effectively. A CRM system aids in managing the lead pipeline efficiently, ensuring timely follow-ups and better customer engagement.

• Insurers can collaborate with agents, providing them with useful tools and apps to engage customers more effectively. For example, an app can be provided to agents, enabling them to download the company's brochure and re-brand it independently. Additionally, the app can suggest personalized messages for special occasions like birthdays, anniversaries, or policy updates, allowing agents to establish a positive and trustworthy relationship with customers.

• This seamless integration of technology and assistance from insurers not only benefits agents in managing their business more efficiently but also fosters stronger customer relations. By providing valuable resources and enhancing customer engagement, technology plays a vital role in ensuring a satisfying and rewarding experience for both agents and customers alike.

In conclusion, the life insurance industry in India faces several challenges, including low penetration rates and persistency issues. However, with the help of technology, these problems can be addressed effectively.