- Endowment insurance has become a driver for the entire insurance market this year, confirming the last year trend. Given the growing popularity of these products, how will these products change?
- Universal life insurance (ULI) is showing growth supporting the insurance market as a whole. Endowment shows an average growth of at least 30% year on year, these products are classic for life insurers and, at the same time, they are the future of the Russian market, as evidenced by the world experience of penetration of these programs. Endowment, however, is facing a rather big transformation. Both Ingosstrakh-Life and the market as a whole, we are all in search of new growth points.
The faster we can respond to market demands, the more efficiently we implement a new strategy, the faster we will go through a development phase of the life insurance market.
If you list in a few words what the endowment products should come to, then you get the following picture: it will be mass products available for purchase and comprehensible for a common consumer, filled with a variety of services, with a wide variability in possible insurance premiums and their terms, up to daily. I also see a great potential in integrating these products into wellness platforms.
- How great, in your estimates, will be the changes and what steps should the insurance community take in order to realize not yet fully disclosed potential of these products?
- Insurers will have to solve three sets of tasks to achieve this goal. The first product block is associated with the development of insurance programs. The second client block implies new approaches to interacting with people and new sales techniques. The third banking block assumes organic and deep integration of insurers into future ecosystems.
Let us start with the products. Entering more massive client segments, in my opinion, is the main trend. Such segments as “private” and “affluent” are already widely covered today. According to the data by the Bank of Russia, as of the first half of the year, the average ILI premium for the last four quarters is 565.7 thousand rubles, and average endowment premium - 136.7 thousand rubles. A significant number of successful "pilots" are in the mass segment.
However, the pandemic and economic difficulties related to it, including drop in people’s incomes, are making their own adjustments. The target audience for most companies is the upper mass segment. This implies a change in the basic principles of product development. On the one hand, mass customers are interested in such solutions, but they are already applying increased demands on the customer value of the product, its filling with various extra services. Besides, the product in this segment should be simple; it should not scare people away with difficult or incomprehensible conditions, as well as high entry threshold, the average check must correspond to the new audience.
- A task block to be solved together with the banks. They are clearly one of the main sales channels for life insurance products. What specific steps do you expect from them?
- The attractiveness of saving (and not only) products for customers directly depends on the cost structure of the insurance company. Thus, the higher the production cost for the insurer, the lower the profitability for such products it can offer the client. There is an obvious possibility to reduce costs. I am convinced that decreasing the traditionally high bank commissions is a compelling need.
- For the market as a whole?
- Yes, it is a problem of the bank insurance market as a whole and not any specific players, be it an insurance company or bank. For example, according to Expert RA, the level of commission on life insurance paid by insurers to banks in 2019 amounted to 20.1% of collected premiums, while in 2018 it was 17.2%. The commission on accident and health insurance, however, increased from 63.8% to 73.5%, respectively. According to the data of Bank of Russia, as of first half of the year, the share of insurance premiums received through the banking channel by all insurers amounted to 34.6% of total fees. That is, more than a third of all premiums are collected by insurers through this channel. As for the life insurance segment, according to ACRA estimates, this rate exceeds 85%.
An attempt to get high margin from each individual sale often leads to the fact that the further customer journey in this channel can be forgotten; i.e., this client can be lost for new sales, as well as the potential future bank commission. It is necessary to keep customers and expand the customer base on honest products with high
penetration into the mass customer base. It will provide much more potential for banks to raise margins. Maximization of product commissions through customer value in bulk sales is a dead-end street.
However, bank insurance also needs to move towards individual product offerings. Digitalization plays a special role in this regard, which in the long term should help in creation of a targeted offer for each specific client. The insurers’ interesting product solutions will allow solve the problem of so-called bank "sleeping clients" among other things.
With the right sales of insurance products, honest and open client treatment, the banking channel will avoid falling into the "labyrinth of uncertainty" and allow the market to move forward.
Source: https://www.insur-info.ru/interviews/1411/
Photos are from open sources.
