HomePersonal Finance NewsWhy it is the right time to get some protection for your portfolio

Why it is the right time to get some protection for your portfolio

The insurance business is adapting swiftly to a post-COVID world, and that’s just one reason you should bet on it.

Profile image

By Sonal Sachdev  May 7, 2020, 1:47:40 PM IST (Updated)

Why it is the right time to get some protection for your portfolio
Next time you call your insurer, you may be greeted by a humanoid who’ll converse with you in the language of your choice to address your needs. This isn’t fantasy.


ICICI Prudential Life Insurance informed analysts in its post-earnings conference call that it had invested in speech recognition and conversational humanoid artificial intelligence tool, activated during the last quarter of the fiscal, which can not only converse with customers in multiple languages but can also reach out to over 50 thousand customers in an hour.

And this is just one example of technology adoption by Indian insurers.

Almost all the top private life insurers were able to swiftly move their operations to near-total digital mode to ensure 100 percent work-from-home for their employees, following the lockdown in March.

Insurance being an essential service, insurers were required to ensure people could buy protection policies to suit their general needs, as well as to guard themselves against the impact of COVID-19—remember insurers floated specific schemes with such cover.

What insurers were also required to ensure was that all claims are settled expeditiously, even during the lockdown.

To ensure this, most insurers moved to processing scanned documents, replacing physical documentation. The regulator, Insurance Regulatory Development Authority of India (IRDAI), also lent a helping hand by issuing a notification on April 23, which allowed most prominent life insurers to undertake paperless KYC (know your customer) compliance via Aadhaar e-authentication.

What COVID-19 has done, is push life insurers to accelerate the digital transformation of their businesses, which one expects would lead to savings in cost and time over the coming years. The insurers, who anyway need to be nimble in a competitive environment to be successful, through product and marketing innovations, now are also sharpening their technology backbone.
But that’s not all that’s going for life insurers in these testing times.

An important takeaway from the post-earnings commentaries of the three largest private insurers—all listed companies—was that they are expecting a tough first quarter in the financial year 2020-21, but see some growth for the year as a whole.

While Vibha Padalkar, the Managing Director of HDFC Life, hoped for a first quarter at par with the one a year ago and improvement in business from thereon, the management of SBI Life Insurance exuded confidence that it would be able to achieve a single-digit growth for the year.

The Managing Director of ICICI Prudential Life Insurance, NS Kannan, while refusing to be drawn into giving any guidance in the present uncertain times, did indicate that business in April had been strong for the protection and traditional policies, though the equity-focused Unit Linked Insurance Products (ULIPs) business had been impacted by the sharp sell-off in the stock market.

The outlook for the current financial year shared by all three life insurers, though a patch over their past growth record of well over 20 percent, does stand out in the context of a sharp de-growth expected in most other businesses. In fact, with India’s gross domestic product (GDP) seen growing at barely about 1 percent this year, any significant growth number would look attractive.

In one aspect, though, the life insurance business is similar to many others. The sharp fall in asset values has dented the investment portfolio of most insurers, many are also reworking claims assumptions to account for a spike following the spread of COVID-virus—as seen during earlier pandemics—and these together are putting pressure on their solvency margins.

Financial strength, is therefore likely to be a key factor for growth and survival, and this could lead to consolidation of players in the sector—as weaker players move out—and consolidation of new business with the top few—as the less resilient find their ability to garner new business restrained.

In a nutshell, therefore, adding a basket of the top, now tech-savvy, private life insurers to your equity portfolio can be a good hedge in these testing times, with more people looking to protect the lives of their loved ones through easy no-contact, digital policy purchases.

And given that India’s insurance penetration is low, there is always the comfort of a long runway of growth ahead.

But don’t take this as investment advice, every individual has different goals and investment needs, so consult your financial adviser or do your assessment before taking any decision.
Check out our in-depth Market Coverage, Business News & get real-time Stock Market Updates on CNBC-TV18. Also, Watch our channels CNBC-TV18, CNBC Awaaz and CNBC Bajar Live on-the-go!