Consumer behavior has been changing in India in recent years as a result of rising incomes and exposure to new ideas and technologies. However, there has been a radical change in this behavior after the COVID-19 pandemic.
Due to the restrictions caused by the pandemic, an increasing number of people have adopted the digital way of availing services. From online shopping, to online grocery ordering, to the use of digital payments, etc., they have changed the way companies conceived, developed their products, operated, reached consumers, and delivered their services.
With nearly 54 percent smartphone penetration in India and the availability of low-cost internet, people in smaller cities have access to the internet and digital platforms. The shift to digital in smaller states and cities also saw a big boost during the pandemic.
People increased their acceptance towards digital payments/wallets, digital insurance, e-commerce in the last year and a half; consumption of platforms such as YouTube, over-the-top digital services, online classes also increased. The use of these digital platforms is now established at high levels, indicating that this change in consumer behavior is not temporary, but will remain forever.
Like any other segment, the personal finance segment was also affected by the digital shift of the consumer. Personal finance companies have jumped on the digital bandwagon to reach consumers and fulfill their financial needs and services. Be it mutual fund companies, stockbrokers, the real estate industry, the insurance industry, each category accelerated the digital path to meet changing consumer demands and needs.
Digital has also been instrumental in raising awareness of multiple financial services. This has been especially true for smaller towns and cities, where people have shown an interest in investing (especially post-COVID), and digital has helped them raise awareness of different financial tools and investment options.
Mutual fund companies encouraged consumers to conduct self-service online transactions; brokerage firms offered online services without brokerage, the government encouraged the purchase of digital gold (via sovereign gold bonds), financial apps were developed to increase financial literacy among consumers.
The insurance industry witnessed a transformation in the way insurance products were bought, sold and managed. Insurance companies, distributors, and web aggregators are increasingly using the digital model and app-based platforms to reach consumers across the country. Digital has proven immensely useful in providing insurance in the smallest towns and cities, and catered to the sudden rising demand in the life and health insurance category.
Speaking about the insurance segment, Insurtech/digital insurance companies also helped raise awareness of insurance and take advantage of the right insurance products. Insurance is a sector in India that has always had a great latent need, but awareness and accessibility were lacking. There are about 700 million consumers who have always needed insurance but lack accessibility.
Digital helped insurance reach those 700 million people, most of whom reside in Tier 2, 3 and beyond cities. The effort to reach the consumer, using digital, is still ongoing in the insurance segment.
If companies in the personal finance segment want to increase their consumer base; they need to keep working on their channel strategies and constantly expand their technology. Companies not only need to develop their digital offerings, but also target their physical workforce to serve a more digitally oriented segment of consumers.
In the health and wellness segment, insurance companies need to accelerate digital adoption to reach more consumers, as there is still a large demand and supply gap when it comes to the insurance category. It is high time for the entire insurance industry to come together and work to build a fully digital insurance infrastructure. This will not only help consumers, but also the huge force of insurance advisors, who are also struggling to grow their insurance sales and consumer base.
It is important for personal finance companies to understand how consumers conceptualize complex financial products today and shape their digital approach accordingly. Along with strengthening the digital arm, companies should increasingly consider personalizing their products, which will help build a credible, long-term partnership with their target consumers.
The author, Balachander Sekhar, is CEO and co-founder of RenewBuy Insurance. The opinions expressed are personal.
First published: IST