Insurance Is A Saviour During Troubled Times

Acting as a financial safety net for individuals and businesses alike, insurance is increasingly vital in today's world due to rising risks like cybercrime, climate change, and economic instability. The insurance industry is evolving, focusing on proactive prevention, data analysis, and personalized solutions, while also adapting to new technologies like AI. This shift emphasises not just compensating for losses but also promoting healthier lifestyles and strengthening resilience against various risks. Insurance provides financial protection against various risks, including medical emergencies, job loss, property damage, and business disruptions. The rise of cybercrime, climate change and financial instability necessitates a stronger safety net to protect individuals and businesses from unforeseen events. They help stabilise the economy by providing security thereby during economic downturns and mitigating losses, preventing scope for any further social inequality. In keeping with the changes, insurers are moving from simply compensating for losses to actively promoting preventive measures and healthier behaviours. In this scenario, collaboration between the insurance industry and regulators will be crucial to address vulnerabilities, manage climate risks, and adapt to technological advancements. It is an exhilarating and challenging time for an industry that is traditionally risk-averse and slow to change.

Now, insurers must harness the momentum they’ve gained to reassess the future and reimagine their place in the world. Life is the mainstay of India’s insurance market, accounting for 74 per cent of total premium volumes. We estimate that life premiums will grow by 4.8 per cent in 2024 in real terms and by five per cent in 2025 (2025‒29: 6.9 per cent). This follows muted growth of 0.7 per cent in 2023, when the savings segment was negatively impacted by regulatory and taxation changes. The life sector is still adjusting to recent regulatory changes, and this could lead to some volatility in profit margins in the short term. However, rising interest in protection products that embody both credit and protection components may mitigate the adverse effect on overall demand. Over the past nine years, the insurance sector has attracted significant FDI amounting to nearly Rs. 54,000 crore, driven by the government's progressive relaxation of overseas capital flow regulations. For decades, life insurers, especially LIC, heavily relied on tax-driven selling. However, life insurance is fundamentally about protecting your loved ones from financial hardship in your absence — not just about saving taxes.

This necessary shift in mindset won't happen overnight. However, it's crucial for life insurers to reframe their communication: Life insurance is about life, not taxes. Building awareness around this emotional and practical core value will determine which companies thrive in the next decade. Life insurance must be positioned as a core financial planning tool: It should integrate seamlessly into a person’s overall wealth and risk management strategy, rather than being sold as a stand-alone tax-saving instrument. Distributors and Financial Advisors will need to become the key value creators: This calls for higher investment in distributor training, better client retention strategies, and rewarding advisors based on the quality of advice rather than just volume of policies sold. When advisors add more strategic value to customers' lives, the industry must ensure they are compensated accordingly. AI is no longer optional — it's essential. Here’s how AI can revolutionize life insurance: Use AI-driven tools to identify new customer segments based on lifestyle data, social media trends, and demographic shifts. AI can mine massive datasets to personalize policy offerings based on health, habits, and life stage. Real-time monitoring of health data and external factors can allow insurers to dynamically adjust underwriting standards.