e-ISSN : 2347 - 9671, p- ISSN : 2349 - 0187

EPRA International Journal of Economic and Business Review Vol - 4, Issue- 3, March 2016
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CHALLENGES AND OPPORTUNITIES OF

B. Raghavendra1
1
Research Scholar in Management, S.K. Institute of Management, Sri Krishnadevaraya University,
Anantapuramu, Andhra Pradesh.
C. Gangadhar2
2
Research Scholar in Management, S.K. Institute of Management, Sri Krishnadevaraya University,
Anantapuramu, Andhra Pradesh.

ABSTRACT

L ife insurance mechanism helps in provide pecuniary value replacement to the family members
in case of unexpected happens to insured. Life insurance helps in spur the economic activity
and development activities by covering the individual risks and providing funds for long term. In last fifteen
years after the entry of private life insurers, Indian life industry penetrated drastically and stands one
among top ten markets in terms of total premiums collected and per capita premium is at par with developed
countries. The growth rate is encouraging and when it compared to potential of the market it is trivial, this
is due to challenges the industry has to overcome to exploit the opportunities it had. This study discusses
the nature of the life insurance mechanism, functions of the life insurance, challenges and opportunities of
the industry
KEY WORDS: Insurance, Challenges, Opportunity, Technology, Customer awareness.

1. INTRODUCTION
Life insurance is a mechanism by which the loss the insurance has been gradually moving in a positive
of a few is shared by the large number of persons, who are way. The significant growth of the industry in last fifteen
exposed to same type of risk. Here every individual years and to this day covered five per cent of the
contribute small sum of money, called premium and it population. The per capita premium is at par with
serves as safety net in the unfortunate event of the loss of developed countries, and still there is lot to do. As most of
the family income earner. The mechanism in arranged the Indian population does have bank accounts with
and taken care of by insurance company in the form of nominal insurance coverage, and the proper risk coverage
insurance contracts offered at competitive prices (Mishra, of an individual is still a daunting task and opportunity to
2006). exploit. Today, life insurance market is shared between
Indian life industry has been growing slowly twenty-four life insurers including market leader, public
and steadily led by LIC of India and after the sector sector giant Life Insurance Corporation of India; the
opened for private sector in 2001, many private insurance industry has challenges and opportunities to be explored.
companies with their foreign partners are operating. The The nature of insurance business is unique,
entry of new companies benefitted the customer with new compared to other financial services. It is a process, where
products and services, and customer awareness towards customer shares his knowledge to buy the insurance
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e-ISSN : 2347 - 9671, p- ISSN : 2349 - 0187 B. Raghavendra & C. Gangadhar
coverage with small sum of money, after assessment is 3. Persistency:-
done and suitable benefit is ensured, with auxiliary benefits Various distribution channels are being used to
provided to customer. This character makes significant acquire customer but persistency ratio, which says
effect on the business growth, which is balanced by customer staying with company, to the end of expiry
providing insurance coverage to large number of people. period as per contract still a challenge. The insurance
firms are facing great challenge in terms of
Function(s) of Life insurance industry:-
persistency, and in collecting renewal premiums
Insurance provide security mechanism to a
(Krishnamurthy, 2004).
person, from contingencies and covers the risks to obtain
4. Right selling:-
financial security at a lowest price. It provides a safety net
Inadequate knowledge and unethical practices by
in the unfortunate event of the loss of an income earner
some insurance advisors, the same portrayed in
for the dependents. Risk is generally imminent, for every
negative manner in public, plays a greatest stumble
individual in pursuit of growth; this mechanism acts as a
to overcome skeptical consumers. However, insurance
cushion in the process and plays pivotal role in stabilization.
regulator, and industry taking various measures to
It is an efficient system of providing savings and security.
contain the mis-selling, insurance selling is a great
The insurance company collects premiums from large
challenge compared to other financial services sales
numbers, who are exposed to similar risk. By innovative
(Halan et al.2013).
products the life insurance system are meeting various
5. People factor:-
customer needs. The pooled money are used for
The people factor plays a pivotal role in the industry.
promoting business, industries and developmental
Though eligible and skilled population is large, but
activities. The combination of insurance and capital
dearth of right talent and attracting committed and
markets play vital role in mobilizing funds and investment
quality talent for every level of management for this
expertise for development of the nation’s economy (Sinha,
fast growing sector has been huge task. Availability
2005)
of various jobs in different sectors and requirement
2.OBJECTIVES AND METHODOLOGY of different mindset to self-motivate and
The main objective of this paper is to focus on perseverance for this industry is great challenge.
the Indian life industry’s challenges and opportunities. 6. Diverse population:-
The methodology of the study is based on Marketing insurance products to diverse populations
secondary data from various IRDAI journals, working with different life style is major challenge. The
papers, published books, websites etc. customer mostly do not indulge in buying insurance
voluntarily, in addition the evolving economic sector
3. CHALLENGES AND
with new careers, short business cycles, changing
OPPORTUNITIES OF INDIAN LIFE
food habits and morale of people are the key factors
INSURANCE INDUSTRY
the industry to cope with (Gopalkrishna.G, 2009).
A. Challenges of Life Insurance
7. Information era:-
Industry:-
People discuss products and services on social media
1. Customer Motivation:-
reviews and comments about companies and their
Insurance is long-term promise, which is realised on
workings. Now companies have risk of single negative
contingency. Motivating customer to buy and getting
review can have huge effect on theirs brand’s
valid and useful information for is itself a unique
task. The insurance firms have great challenge in reputation. As information is easily available at
terms of collection of customer’s information, customer end, the company and its people have to
regarding the product and to offer other required be consistent and assure the customer all the way,
products accordingly. this is a challenge to every insurance firm.
2. Insurance awareness:- 8. Rating criteria:-
Though the number of insurers’ increased, financial Any of the Indian life insurers is yet to be rated by
literacy and awareness in terms of understanding rating agencies, for the customer to pick one of them
of products and services by customers is huge is a challenge. However, individually insurance firms
challenge. Early years of private life insurers resulted are using reputed rating organisations to evaluate
great expectations and lot of disappointments from in different criteria. It may take some more time to
the customer perspective. The customer anticipation give ratings on par with developed markets for this
has to be meeting by innovative means. long-term oriented industry.
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EPRA International Journal of Economic and Business Review
9. Advisors:- and Indians naturally good at saving for future
Majority of advisors are mostly part timers, motivating needs, gives great opportunity to insurers. The
them to become true professionals is a big challenge insurers channelize the savings into innovative
for this industry. Recent changes and freedom given insurance and annuity plans.
to insurance firms in acquisition of advisors, the 5. Technology:-
changing role of advisor from company and customer Technology has been great boon for the insurance
perspectives moreover continue to generate business industry in boosting infrastructure for growth,
is a daily test for him. scalability and reach in every sphere (Cummins
10. Other than term covers:- & Santomero, 2002). New generation employee’s
The basic purpose of insurance is for protection but are keen in discussing products and services on
even today, most insurance sales happen with social media reviews and comments about
perception of tax planning and investment companies and their products. Companies have
instrument. Indian insurance professionals to this lot of scope to offer their present and future
day do not start the customer relationship with customers by this media.
providing pure risk cover coverage, i.e., term cover, 6. Customer expectations:-
added with negative perception of customer in this Competition among various distribution channels
product is the reality to confront with (Krishnamurthy leads to fall of premium and help to improve
et al. 2005). customer service standards economically. In
B.Opportunities for Life Insurance terms of Customer service there is a lot to do by
Industry:- insurance firms, as increase in channels,
India ranks in top 10 life insurance markets, expectations of customers will increase
penetration of insurance in single digit gives vast (Krishnamurthy & Cotham, 2009).
scope to penetrate and serve the customer. 7. Distribution channels:-
1.Majority of young population:- With the spread and depth of various
The majority of India will be of working distribution channels would help greatly in
population 795.5 million by 2025. Rise in number expanding footprint of the life insurance
of professionals, emergence of prosperous industry. The traditional mode of selling
middle class and increase in awareness leads to insurance is slowly changing, today most of the
rise in demand for insurance. Increasing per insurance firms are using data collected by
capita GDP is a huge opportunity for insurers distribution channels and exchanged with other
with their varied products in every segment. financial service providers to provide customized
2.Lot of potential:- products.
Increasing urbanization of rural areas and 8. Innovative process:-
growth in new bankable households are of great After fifteen years of private life insurers in the
opportunity for insurers, to offer customized life field, there is drastic change in terms of people
insurance products (Negi & Singh, 2012). Though perceptions regarding insurance firms and their
increase in number of insurers over last fifteen services. Joint ventures with seasoned insurers
years, and yet to insure more than 50% of will help to share their knowledge; processes will
insurable population of India, shows still there help to bridge the huge gap in insurance
is lot to do. penetration.
3.Different products to offer:- SUGGESTIONS/Steps needed to be
Increase in life expectancy of individual, favorable initiated by Indian Life Insurance
savings and employment opportunities in private
Industry:-
sector gives greater demand for pension plans.
Indian government had taken adventurous
Majority of employees have no formal pension
decision, by inviting private companies in insurance sector,
system to choose from, thus greater opportunity
subsequently passed Insurance Regulatory and
to insurers.
Development Authority Act in 1999, and IRDA listed
4.Rising income levels:-
regulations for life insurance organisation’s operations.
Globalisation and economic reforms in the In spite of so many regulatory guidelines involve changes
country have the raised people’s income levels like downsizing the mediator commission, tightening
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e-ISSN : 2347 - 9671, p- ISSN : 2349 - 0187 B. Raghavendra & C. Gangadhar
advisor recruitment process and mandating Plan Benefit CONCLUSION
illustrations, alas to this day industry is struggling with lot The life insurance industry consists of private
of problems. These steps are not able to bridge the gap insurers in their teens and public sector giant, has unique
between customer expectations and Insurance Company challenges and untapped opportunities to exploit, the
processes. Regulator has to take solid steps to regain the insurers steadily getting customer’s acceptance
customer confidence on Life Insurance. nevertheless various initiatives are expected from industry
   Advisors Knowledge Level: There is no and customers perspective, the two key stakeholders of
proper periodical assessment on insurance advisors this industry. Insurance regulator can take measures viz.,
knowledge levels. Currently the prospective advisors to monitor the knowledge levels of the advisor, the pivotal
need to clear very simple exam to become a Life cog in the insurance process of traditional distribution
Insurance Advisor. After that no knowledge channel; Simplicity of insurance products that can ease to
upgrading program is mandated for an Advisor. Very customer to understand the deposit products and
few companies are implementing regular training insurance plans; Standard operating processes ease the
interventions to Advisors. It is irony, to believe some filling up and understanding the plans. The present
Life Insurance companies do not have Training opportunities can be optimally utilized by the industry by
Department at all. IRDAI has to frame stringent leveraging technology, reaching the rural India as FMCG
norms on Advisor Education program. Even mis- companies strategized their business at bottom of
selling can be controlled because of this factor. pyramid, and focusing on women population with
Simplicity of Plans: Even today people are in customized products, as aspirations and income levels are
confusion state on Insurance plans, and not able to in constantly improving.
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