Ah, September. My favorite month. It kicks off with the Labor Day weekend, the weather hovers between blazing summer and cool autumn, the kids are back to school, and my birthday is tucked in there somewhere. Professionally, it is Life Insurance Awareness Month, which provides us with an unusually large pool of stories to report.
But before we get too deep into that, I thought we could start by looking at another life insurance celebration overseas. Insurance Week is an industry event similar to Life Insurance Awareness Month, held in India and organized by the Life Insurance Corporation of India, that country’s largest life insurer. The whole thing kicks off with LIC’s celebration of its 55th Foundation Day, so the industry event is more about this one company than anything else. Future Generali India has a similar event, which in the past garnered for itself a Guinness World Record for the longest chain of balloons – each one having been signed by somebody protected by life insurance.
Events such as these would be like if Life Insurance Awareness Month just happened to coincide with the birthday of Prudential or MetLife, which here would seem a bit strange, given how Life Insurance Awareness Month really is about an entire industry and class of financial protection more than it is about any one company. But in India, the life insurance world there is quite a bit different than it is here. For those of you who don’t follow insurance in India, it is an interesting market with some striking lessons to offer.
First and foremost, for a nation with just over a billion people and one of the fastest-growing economies in Asia, India has incredibly low insurance penetration. Last I checked, it was just not even 5 percent for life insurance, and P&C was a fraction of that. As one article I read points out, the current generation of “young India,” which is largely responsible for that country’s incredible economic surge, is also almost entirely uninsured and will soon enter what would be in the U.S. the prime age for buying life insurance. And yet, the typical problems that plague U.S. sales are intensified in India, where widespread ignorance of the benefits of life insurance and a deep mistrust of the industry make life a hard sell indeed.
Complicating matters is the nature of the industry in India itself. Prior to that country’s independence, there were almost 300 private life insurers operating in the country. Initially, the industry there was aimed at Europeans living in-country. when coverage was initially offered to Indians themselves, it was usually at a higher premium (that alone, I imagine, could jumpstart a serious distrust of the business.) Once the country gained independence after World War II, a series of scandals and fraud at some private insurers prompted the Indian government to nationalize the entire industry, folding all private life insurers into the mammoth Life Insurance Corporation of India. LIC maintained a monopoly on life insurance until 2000, when the Insurance Regulatory and Development Authority Act of 2000 okayed private life insurance once more, operating under the aegis of the Insurance Regulatory and Development Authority.
Most private life insurance in the country today is a joint operation between a global name and a domestic partner. In this manner, powerhouses such as MetLife, Prudential, Allianz, New York Life, Aviva, ING, AXA and Aegon all maintain a presence in the Indian market. But the market, as it were, is hardly a stable one.
According to a Money Guru India story published yesterday, total life insurance premium in the country has tumbled in recent months, thanks largely to IRDA’s recent rules banning the linkage of life insurance with investment-like features. It looks like that will eventually get figured out, but until then, sales of life insurance are hurting indeed. LIC is still doing alright, boasting a 62.3 percent year-to-year premium growth, but the private sector overall has experiences a 38.8 percent premium decline over the same period. Given that LIC is the 8th most trusted brand in India right now, one can see how, without the added investment incentive to blend into its products, the private sector really is behind the eightball in a country where there would seem to be incredible market opportunities.
And while private companies are trying to revamp their product offerings and distribution models (sound familiar?) one cannot shake the feeling that until the massive shadow of LIC is no longer keeping its thumb on private enterprise, the life industry in India will never really take off. That is a shame, too. Take a look at any MDRT meeting, and you’ll see that Indian attendance is sharply on the rise; clearly this is a nation that has developed acumen for developing its own insurance market, with a vastly underinsured populace to serve. (One that, frankly, makes our own underinsurance problem seem trivial in comparison.) How great it would be if the Indian government could find the courage to break up LIC, or to do something that lessens the state’s grasp on a nascent private insurance sector. When I was still working for the Risk and Insurance Management Society, I used to get a lot of requests from Indian companies on risk management because nobody over there knew anything about it. The state control of risk and insurance had essentially turned that part of business into a function of government bureaucracy. I have to believe that a similar effect is occurring in the life world, when the former state monopoly still controls about 70% of the market.
India has been one of the great economic success stories in recent years, and all this while still clinging to some pretty outmoded business models. Just imagine what could be done – and what U.S. companies could be doing – if only India really embraced a full free market. LIC may very well be a fantastic company with great products and great people. But given the shadow it casts over struggling private competitors who are forced to duke it out over a market base of only some 40 million people, one wonders if the LIC is doing India more harm than good. I suspect that it is.