How life insurers can thrive in the new normal

The purpose of all life insurance companies is to give customers financial support and protection to help them manage unexpected fiscal surprises in their lives

Bangladesh has great potential to increase the contribution of its life insurance industry to the economic progress of the country.

Currently, life insurance penetration in the country remains at less than 0.5% of GDP and while there have been good developments taking shape in recent years, the Covid-19 crisis has enabled insurers to look at the short to long term challenges through a new lens of business competitiveness and customer needs.

The purpose of all life insurance companies is to give customers financial support and protection to help them manage unexpected fiscal surprises in their lives.

Hence, it is extremely important that insurance companies maintain robust financial health and operational efficiency so that they can deliver services and keep their promises to their customers.

Maintaining the momentum of growth and stability amidst emerging challenges must be the key priority for all life insurers in Bangladesh.

In light of the unprecedented shift in business landscape, here are 5 key challenges faced by life insurers in Bangladesh and how customers should assess these:

1. New customer acquisition: Our life insurance market is predominantly driven by agent face-to-face interactions, and more than 98% of customers purchase their policies through insurance agents and multiple on-site interactions.

Lockdowns and social distancing in response to the pandemic have seriously challenged this traditional distribution channel, not only for meeting new customers but also for completing important steps in the process such as medical examinations and underwriting.

Investing in simplification and digitalization are important changes to help resolve the issue.

Additionally, in the short term, companies should focus on virtual channels for recruiting, training, and engaging their agents, while alternative distribution channels such as online channels address many customers’ preferences.

Finally, insurers should always closely monitor the changing needs of customers and change their product offerings accordingly.

2. Existing Customer Management: Despite the efforts of many insurers to extend the grace periods for payment of premiums, lapsations of policies are rising. Improving the convenience of premium payments to the customer is a critical area for insurers, as is proactive communication through text messages and call center contact to remind customers of the criticality of insurance benefits and compassionate interactions can help to reduce lapsation and build stronger long-term relationships.

3. Claims Management: Due to the virtual work environment and difficulties in conducting required inspections, the turnaround time of claims processing may be delayed while a higher volume of claims may also strain financial management.

However, this is the moment of truth for companies and they must always remember that insurers are in the business of claims.

Policyholders need insurance companies by their side with an expectation of fair and fast claims processing, while companies that get this right, will engender customer loyalty and improve brand reputation.

4. Investments Management: Savings still is a key priority for most Bangladeshi customers. So, for those insurance products which have a savings component, customers expect a good return on their investment alongside financial protection.

However, investment returns with an insurance product cannot be as good as returns for more high-risk products without a protection element. Because Insurers are investing customers’ premiums with a long term focus in order to ensure that they can deliver on their promise to provide financial protection, it is very important – especially in a low interest rate environment or a volatile market scenario, to ensure that customers fully understand what their product covers and why.

As an investment management practice, insurers should also look into identifying the scope of investment return optimization without compromising risk appetite.

5. Business forecast management: A number of business risks are forecast and managed by actuarial assumptions which predict a broad scope of events.

These events include mortality, morbidity, lapsation, expense and interest rate, and are subject to change as the situation evolves.

Covid-19 has had a significant impact on these predictions, and insurance companies need to react to trends and developments in a swift manner, while regularly monitoring their underwriting, claims and other processes against actuarial assumptions to ensure that customers can continue to enjoy uninterrupted service no matter what the external circumstances.

With the current pandemic, each company is facing unique challenges and opportunities. The situation is truly reflective of the axiom: Change is the only constant.

The life insurance business, like any industry, needs resilient and adaptive mindsets and actions.

Companies who have this can better serve their customers, deliver to them the right solutions, and truly contribute to the social safety net of our country.

The author is executive vice president, product and solutions at MetLife

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