Data Quality

This research summary was first published in the IIB Bulletin, 2014, Vol. 1, Iss. 2, pp-11-12; Co-author: Vishnu Vardhan Pallreddy

https://iib.gov.in/IRDA/Articles/IIB%20Bulletin%20Q2%202014-15.pdf

Background

Insurance Information Bureau of India (IIB) was provided with the mandate to collect data from all licensed Non-Life Insurers in 2009. Since then, IIB has developed applications for online submission of data by the Insurers, has made progress in receiving data on a more timely and complete manner.

However, data quality remains a big challenge and concern. Efforts are being undertaken to address this. It will always remain an important item. The following sections talk about various aspects of data quality.

Quality

“Data are appropriate if they are suitable for the intended purpose of an analysis and relevant to the system or process being analysed” – Section 2.1, Actuarial Standard of Practice (ASOP) No. 23 [1].

“Data quality is often perceived as a mundane issue with less recognition and attention devoted to it than other issues, such as actuarial models and methodologies. However, data exists to fulfil a need: the need for optimal decisions” [2].

“Data quality should therefore, be an integral part of the operational considerations of all companies involved in insurance” [3].

“Overview – Data that are completely accurate, appropriate, and comprehensive are frequently not available. The actuary should use available data that, in the actuary’s professional judgment, allow the actuary to perform the desired analysis. However, if material data limitations are known to the actuary, the actuary should disclose those limitations and their implications.” – Section 3.1, ASOP No. 23 [1].

Selection

The following are some selective excerpts from the Section 3.2 of ASOP No. 23 [1]:

a. consider the data elements that are desired and possible alternative data elements; and

b. select the data with due consideration of the following:

1.       appropriateness for the intended purpose of the analysis, including whether the data are sufficiently current;

2.       reasonableness and comprehensiveness of the necessary data elements, with particular attention to internal and external consistency;

3.       any known, material limitations of the data;

4.       the cost and feasibility of obtaining alternative data, including the ability to obtain the information in a reasonable time frame;

5.       the benefit to be gained from an alternative data set or data source as balanced against its availability and the time and cost to collect and compile it.”

Reliance

The following are some selective excerpts from the Sections 3.3 and 3.4 of ASOP No. 23 [1]:

Reliance on Data Supplied by Others—“The accuracy and comprehensiveness of data supplied by others are the responsibility of those who supply the data. The actuary may rely on data supplied by others, subject to the guidance in section 3.5 (Review of Data). In doing so, the actuary should disclose such reliance in an appropriate actuarial communication.”

Reliance on Other Information Relevant to the Use of Data – “The validity and comprehensiveness of such information are the responsibility of those who supply such information. The actuary may rely on such information supplied by another, unless it is or becomes apparent to the actuary during the time of the assignment that the information contains material errors or is otherwise unreliable. The actuary should disclose reliance on information provided by another in an appropriate actuarial communication.”

Quality Review

The following are some selective excerpts from the Section 3.5 of ASOP No. 23 [1]:

“Review of Data - A review of data may not always reveal existing defects. Nevertheless, whether the actuary prepared the data or received the data from others, the actuary should review the data for reasonableness and consistency, unless, in the actuary’s professional judgment, such review is not necessary or not practical.”

“a. Data Definitions - The actuary should make a reasonable effort to determine the definition of each data element used in the analysis”

“b. Identify Questionable Data Values - The actuary should review the data used directly in the actuary’s analysis for the purpose of identifying data values that are materially questionable or relationships that are materially inconsistent. “

“c. Review of Prior Data - If similar work has been previously performed for the same or recent periods, the actuary should consider reviewing the current data for consistency with the data used in the prior analysis.”

“If, in the actuary’s professional judgment, it is not appropriate to perform a review of the data, the actuary should disclose that the actuary has not done such a review and should disclose any resulting limitation on the use of the actuarial work product.”

Use

The following are some selective excerpts from the Section 3.7 of ASOP No. 23 [1]:

 “Use of Data - Because data that are completely accurate, appropriate, and comprehensive are frequently not available, the actuary should make a professional judgment about which of the following is applicable:”

“a. the data are of sufficient quality to perform the analysis;”

“b. the data require enhancement before the analysis can be performed, and it is practical to obtain additional or corrected data that will allow the analysis to be performed. “

“c. judgmental adjustments or assumptions can be applied to the data that allow the actuary to perform the analysis. If the actuary judges that the use of the data, even with adjustments and assumptions applied, may cause the results to be highly uncertain or contain a material bias, the actuary may choose to complete the assignment, but should disclose the potential existence of the uncertainty or bias, and, if reasonably determinable, their nature and potential magnitude;”

“d. if the actuary believes that the data are likely to contain material defects, the actuary should determine, if practical, the nature and extent of any checking, verification, or auditing that may have been performed on the data. Then, if, in the actuary’s professional judgment, a more extensive review is needed, the actuary should arrange for such a review prior to completing the assignment; or”

“e. if, in the actuary’s professional judgment, the data are so inadequate that the data cannot be used to satisfy the purpose of the analysis, then the actuary should obtain different data or decline to complete the assignment.”

Communication and Disclosure

The following are some selective excerpts from the section 4.1 of ASOP No. 23 [1]:

“Communication and Disclosure - When issuing communications under this standard, the actuary should comply with ASOP No. 41 [4]. In addition, the actuary should disclose the following items:”

“a. the source(s) of the data;”

 “b. whether the actuary reviewed the data and, if not, any resulting limitations on the use

of the actuarial work product;”

 “c: the extent of the actuary’s reliance on data and other information relevant to the use

of data supplied by others;”

 “d:any material judgmental adjustments or assumptions that the actuary applied to the data, or are known by the actuary to have been applied to the data, to allow the actuary to perform the analysis;”

 “e: any limitations on the use of the actuarial work product due to uncertainty about the quality of the data;”

 “f: any unresolved concerns the actuary may have about the data that could have a material effect on the actuarial work product;”

  

References:

1.       Actuarial Standard of Practice No. 23: Data Quality, Actuarial Standards Board, revised edition. American Academy of Actuaries, 2011.

2.       Actuarial I.Q. (Information Quality), CAS Data Management Educational Materials Working Party, 2008.3.       Data Quality in the Insurance Market, ACORD Corporation & Watertrace Management Consulting, 2011.4.       Actuarial Standard of Practice No. 41: Actuarial Communications, Actuarial Standards Board, revised edition. American Academy of Actuaries, 2010

Uninsured Vehicles

This article was first published in the IIB Bulletin, 2014, Vol. 1, Iss. 2, pp-6-7; Co-authors: Jacob Thomas (IIB) and M.S.Jayakumar (IRDA)

https://iib.gov.in/IRDA/Articles/IIB%20Bulletin%20Q2%202014-15.pdf

Third Party (TP) liability is compulsory for vehicles or drivers in many countries across the world. In India, Section 146 of Motor Vehicles Act [MVA] (1988) mandates TP liability insurance of all motor vehicles in the country. But noninsurance of motor vehicles is a hard reality, not just in India, but also across the world.

Uninsured vehicles not only increase the cost of Insurance for those who buy the cover but also result in huge costs to the Insurance companies. In the USA, a report by the Insurance Research Council (IRC) estimated that $2.6 billion was paid by insurers to cover uninsured motorist claims in 2012.

“In addition to paying for insurance that covers their own actions, insured drivers pay a portion of the costs incurred by drivers without insurance through uninsured motorist (UM) coverage. For insurers, costs associated with UM claims can be substantial.”.... Uninsured Motorists, 2014 Edition

In a study done by IIB, it was found that out of the 32.9 million vehicles registered in India (excluding two wheelers), 9.5 million were uninsured. If the two wheelers are included, a whopping 55% of vehicles on Indian roads were uninsured in the year 2012.

These statistics are alarming. In an attempt to understand if the other countries around the world also suffer from the same malaise, we collated the available information on percentage of uninsured vehicles for various countries.

Source: Compiled by the authors from various sources

In the USA, the IRC report estimated that 12.6% of the motorists were uninsured in 2012. Oklahoma State had the highest percentage of uninsured motorists, at 26 percent, and Massachusetts had the lowest, at 4 percent.  Penalties and stricter regulations did not help in improving this statistic. Though there seemed to be some relation with unemployment.

Sustained efforts by Motor Insurance Bureau (MIB) of UK have seen a significant fall in the number of uninsured vehicles in the country over the last decade. Police enforcement activity since 2005, combined with the introduction of Continuous Insurance Enforcement (CIE) in 2011 has seen a near 50% reduction in uninsured driving on UK roads, as per a MIB report.

The Italian association of insurance companies reported that 8% of the total vehicles on Italian roads were uninsured in 2013. It also went on to indicate that a drop in the premium for third-party insurance did not result in improving the figures.

According to TISPOL, there were 7.6 billion registered vehicles in Greece, in 2014. As per Greek Union of Insurance Companies, about 10% of them are uninsured. This is in spite of the falling premiums in Greece, due to fierce competition between insurance companies and heavy fines.

Percent of uninsured vehicles in Brazil and South Africa is even higher than in India. We do not expect the situation to be any better in many other emerging countries.

There are large numbers of uninsured vehicles on the road across the globe. This poses a grave danger to the society as a whole. It also results in economic loss to the insurers. Apart from penalties and stricter regulations, a nationwide, sustained mission, supported by enforcement agencies and other stakeholders is the need of the hour, in all countries suffering from this plague.

“It will not be an exaggeration that this menace has to be tackled on a Mission Mode, a la Polio eradication!”...R. Raghavan, CEO, IIB

Another phase in money’s evolution

This book review was first published in The Hindu on September 02, 2014

http://www.thehindu.com/books/books-reviews/another-phase-in-moneys-evolution/article6370417.ece

Easy Money — Evolution of the Global Financial System to the Great Bubble Burst: Vivek Kaul

Sage Publications India Pvt. Ltd.

B 1/I-1, Mohan Cooperative Industrial Area,

Mathura Road, New Delhi-110044

Rs 425

The first book in the trilogy tracing the evolution of money took us through the era when anything and everything was treated as money in some or the other part of the world. From salt, to dried cod, cowry shells to cattles and even slaves!

The second book in the ‘Easy Money’ series, from the same publisher [Sage], continues the journey from where the first book left us, the First World War. When one finished reading the first book, one felt a part of history. You know the feeling, like when we hear stories about our forefathers and want to go back in time. The only problem is that history books are more focused towards battles and boundaries and not on [common] man and money.

Most of us, in our generation, the next and the previous too, have read about the World War I, World War II, Cold War and the Gulf War in our history lessons. But what we did not read about is the hara-kiri that ‘Money’ was going through while Hiroshima was burning. “Dollar became as good as gold” in the aftermath of the World War II. But why? Kaul explains it beautifully in his book.

Similar scenario

The flow of money from the U.S. to Japan to U.S. and the huge budget deficits that the U.S. economy ran up in the 1960s mirror the U.S.-to-China-to-U.S. scenario in the 21 century. The chronologies of events as detailed by Kaul in the book are so reminiscent of our times, that they not only familiarise us with what happened then, but also clarify what is happening now.

We have vivid memories of the Gulf War and the dot com bubble bust. Those of us who actually read the papers then and were of a curious mind, would always feel frustrated. No news, no report was comprehensive enough. Why what was happening was actually happening? Were the analysts so blind that they recommended [buy] Worldcom at a valuation of $200 billion? How could eToys be more valuable than Toys ‘R’ Us? Kaul gets into the skin of the matter. From the policies of Greenspan to superstar analysts and the irrational exuberance, he weaves them all with the history of easy money.

The book is even good for those who want to understand the development of various financial products and institutions. For example, the advent of Investment trusts (mutual funds of today) in the early 1920s in the U.S. Or, the formation of the Organization of the Petroleum Exporting Countries (OPEC) in 1960 and the role it played in ensuring the supremacy of the U.S. dollar.

Fed under Greenspan

Alan Greenspan became the Chairman of the Federal Reserve of the United States in 1987 and soon became “the darling of the American media and the world media as well as Wall Street firms”. His policies which ensured that interest rates were cut at the ‘right moment’ and constant pumping of the money into the system led to the overvaluation of the American Stocks and the ‘Irrational Exuberance’ that he was too well aware of. Kaul explains the steps, the thought process and the roles of various institutions that led to the decisions taken by Greenspan, which eventually resulted in the Dot Com bust of the 2000. Many more such stories make the book a very interesting read.

In this book, Kaul had a tough task at hand. The first one read like a fiction; you start reading and put it down only when you finish it. This volume started around the First World War and since then, the financial system started becoming complicated. Especially after the collapse of the Bretton Woods system when currencies started to float. To keep the language simple and terminologies comprehensible to the poets [non-economists] must have been an onerous task. Kaul manages to do just fine.

The second book in this trilogy is strongly recommended. If one wants want to understand the present, one must read this historical account of the evolution of money. Because, history repeats itself so does Economics!

Life Insurance: The Noble Business

This interview was first published in the IIB Bulletin, 2014, Vol. 1, Iss. 1, pp-3-4 

https://iib.gov.in/IRDA/Articles/IIB%20Bulletin%20Q1%202014-15.pdf

Mr. K S Gopalakrishnan, a fellow member of the actuarial bodies of Canada, UK and India, an associate of the Society of Actuaries (USA) and fellow of the Insurance Institute of India, has been in the Life Insurance Industry for over 30 years. He has worn many a hats during this journey; Appointed Actuary, CFO, Underwriter, product developer, and now the CEO and MD of AEGON Religare Life Insurance Company and a member of the Council and Vice President of Institute of Actuaries of India.

His passion for the industry is evident in his gleaming eyes and the pride with which he talks about his involvement with the Mortality studies of Indian insured lives (1994-96) for LIC and the product innovations. In an interview with Dr. Nupur Pavan Bang, Head- Analytics, Insurance Information Bureau of India, Gopalakrishnan talks about the “noble business” of Life Insurance and its future, in India, according to him.

You have been credited with the innovation of the unit linked product (ULIPs). Does it bother you that many people lost money because of this product?

An entire business model revolving around unit linked insurance products was launched in March 2001. It changed the industry completely. The product brought transparency, liquidity and flexibility to customers. The sales process was backed by interesting features through customized benefit illustrations and the free look option.

Over the years, many challenges emerged largely related to sales process and customer understanding. The sales process sometimes involved positioning the product as a short-term product (say, three years) indicating consistent superior market returns. I am not sure if every customer fully understood the market risk associated with stock markets and the interest rate movements. This also leads to the question of whether unit linked products are for every customer segment or not. There were challenges.

When a weaker stock market started hitting, customers started comparing their policy fund values with premiums paid and then came the complaints. The product was good, is still good and will deliver customer value as long as customers realize it is an insurance-cum-investment product that has to be held for the long-term.

You pioneered concepts such as online Life Insurance, unit linked with investment guarantees and free looks in India. What has been your experience with the regulation? Do you think excessive regulation impedes growth and innovation?

I view these things as a cycle. This is an evolving market from a regulatory architecture viewpoint. The market opened up only in 2000. Everyone is learning along the line, including the insurers, management, employees. Many are new to life insurance. You talk about long-term business, and the longest experience that people have in some of the companies [private sector] in this industry is just about 10 years. I see this as a game where everyone learns and then changes.

When the opening up happened in 2000, there was complete freedom in terms of product design, pricing and largely even how distribution evolves. Towards the end of first five years of opening up, challenges around customer perceptions started emerging. To respond to those challenges, boundaries were created for product innovations in savings/investment-cum-insurance category, probably for the right reasons by the regulator.

There is still a huge scope for product innovation in the protection space. You can develop products for segments which are not yet offered insurance. Lot of data and research backing is required.

Do you mean micro-insurance? Or do you have any other segment in mind?

One is by gender (women, working women), they could be targeted. Second are health conditions which industry doesn’t rate. For example, conditions like certain types of diabetes. For every risk there is a price. Price may be unacceptable, but then we should find ways to hedge the risk and offer solutions to customers.

What about Mental health insurance? There is no such policy in India which caters to this. Do you see it as a potential area?

I am not sure. It may help if government plays an active role in this space so that more people have access to the related health care.

India has the highest savings rate in the world at around 30% of the GDP. According to 2012-13 data published by the Reserve Bank of India, a large part of it, around 65%, goes into physical assets and about 35% goes into financial assets (currency, fixed deposits, stocks, insurance, pension, etc). Life Insurance accounts for about 20% of the financial savings. In spite of this, the penetration is low in India.

When someone buys motor insurance, nobody asks, “what will I get on maturity?” In life insurance, almost everyone asks that question. As an industry, we need to answer that. People of India are skewed towards saving and investment products. This is the reason we still see life insurance positioned around savings and investments.

Also, collectively, the industry must reach out to people, campaign, and tell them the importance of insuring against dying, living longer and against falling sick. In 2008, we ran a campaign, “kum insurance lene ki bimari (K.I.L.B.) (the disease of under insurance)”. But we did not have the right distribution channel to translate this message into results. In 2009, we launched online term insurance product because we realized that there is a customer segment that wants to buy life insurance only for pure risk protection and would like to do that directly with the life insurer. I am happy to see that a large part of the industry players too have moved in this direction.

In my opinion, Insurance penetration, Premium to GDP, is not the right measure for life insurance. A right measure could be the amount of risk coverage in-force as a percentage of GDP.

Is insurance density a better measure?

The amount of risk cover in-force is perhaps a meaningful measure i.e. what is the total sum assured or death cover of the population and what is the GDP for the country?  If someone aged 35 is working today, they should be covered for 15-20 times what their annual earnings is.

A person earning Rs 50,000 month and holding a savings-cum-insurance product paying Rs 2,000 premium every month for Rs. 2.50 lakh sum assured is perhaps an inefficient and inadequate insurance cover.

Would keeping aside a small percent of the revenue or profit for awareness help? Securities Exchange Board of India has mandated an Investor Protection and Education Fund. Would a similar initiative in Insurance be helpful?

This would surely help. Awareness of life insurance should be spread. Advantage that Life Insurance has over Mutual Funds or equities is that life insurance is always viewed as a mass market product category. Life insurance reaches even people at the bottom of the pyramid. Life Insurance has more touch points than many other financial products and running a campaign should be easier.

Is there anything specific that the industry can do to capture the market? The section of society which actually needs insurance is not getting it.

I believe Life Insurance is the only business where, when the customer is no longer there, we go and pay a financial benefit. It is a noble business. In the last few years, things have become complicated. The brochures, the policy document, the terminologies, are all very complex. Very few customers read the material that is sent to them. The purchase process as well is complicated and has become time consuming. So simplifying things is important.

At AEGON Religare, as an organization, we want to try and do it [simplification] as an initiative this year.

For the period 2000 to 2010 we saw a steep growth of 30% in the life Insurance sector. But from 2010 to 2012, the growth has come down to 3%; lower than the GDP. How do you see the growth in the next ten years?

I think it will be modest for few years and then start picking up. Life insurance is a retail business. There are certain products which cater to groups or businesses, such as employer-employee term insurance, gratuity etc. But largely, it is a retail business. People like to sit across a table, understand the product and then buy. Agents play an important role. There are other channels, though agents still have the dominant share.

Training the agents is a big challenge, especially in an environment which is volatile. Things keep changing, product design keeps changing, tax requirements change, and agents need to be re-trained. People get disinterested and feel that there is no stability. There is some nervousness in the front line. That is one reason the growth has been muted.

Second reason is that in the past the industry grew on back of lot of ULIPs selling, where expectations were created about superior returns. Now, with change in product mix towards guaranteed benefits products, industry sales growth will be moderate.

Stability for the next 3 years in products regime and growth of GDP will bring back growth to the life insurance market.

Is the industry well poised to manage risks? The Banking sector in India is going through an era of high non-performing assets. Do you see an Asset Liability mismatch (ALM) happening in the Life Insurance industry in the future?

There are two types of risks (apart from operational, litigation, strategic, etc.), one is insurance risk (e.g. mortality, morbidity) and the other is investment related risk (e.g. ALM).

I don’t see mortality/morbidity as a big risk, because by and large life insurers are good at pricing this risk and underwriting this risk. Also, there is reinsurance which is for the entire term of the contract. It could also be a one-time event like a catastrophe. I think industry is good at quantifying it [the associated risk] and transferring it.

ALM risk certainly exists as everyone is writing liabilities that are of long-term. For example, products with policy term of 15 years and longer are quite prevalent. The reality is also that there are not enough investment avenues that match the liabilities by duration and cash flows. If after a few years, interest rates start dropping and reach say 2% and there is a big block of existing business, then you will see the problem starting. We are aware of the risk. We can run models quantifying the risk and set aside a reserve for the risk. But, the risk still exists.

It is an issue for the industry as there are not enough hedging avenues. This is one of the reasons why private players moved to Unit Linked products. In Unit Link we kept the mortality risk but transferred investment risk back to the customer. But I hope things will change as the regulator considers investment in derivatives for longer duration. The financial markets too have to develop depth.

India's economic scenario: A new perspective

This article was first published in the business section of www.rediff.com on July 21, 2014; Co-Author: Khemchand H. Sakaldeepi

http://www.rediff.com/business/report/special-indias-economic-scenario-a-new-perspective/20140721.htm

In the first article in the series of understanding how the economic machinery works, we introduced transactions, credit, interest rates and inflation. In the second article, we dealt with the importance of credit and introduced deleveraging. In the third part we delved into the impact of deleveraging and introduced fiscal deficit and quantitative easing.

This concluding part will weave all the different parts of the economic machinery together to help the readers take a view on the current economic scenario in India with a new perspective.

The case of India is very different from any other country in the world. We once controlled 25% of world GDP but today we are far from there. The major issues that we face today are:

·   Lack in the sense of building consensus to take any important and sometimes difficult decisions due to our democratic form of government

·    High inequality when it comes to wealth distribution

·   Lack of interest in becoming more productive, generally. Socialist measures and freebies are good only in the short run as they act as a tonic to the pain for people in lower income strata. But we really need to become productive in the long run so that everyone gets what they deserve. This calls for a shift in the morale and thinking in our country as a whole.

Come to think of it, whatever the ideologies of our leader are, the end result should be nothing more than well being of our fellow citizens. Health, wealth and wisdom must be easy to pursue in our country.

In fact we believe that economic progress is the answer to our disputes with China, Pakistan and also important to taken seriously by other nations. Internal problems like naxalism can also be fought with economic powers.

Even ancient wisdom suggests that economic progress is the key to power and economics is the mother of all human knowledge.

In economics there is a concept called Nash equilibrium. If we all fellow citizens were to follow our culture and wisdom from our texts then this will make us work optimally as we will do best for ourselves but also best for the group (country) hence reaching equilibrium which is the right place we deserve.

Dharma as per Bhagvad Gita has 5 parts:

Gyan – Pursuits of knowledge of self and skills required to earn a living

Samarpan – Dedication to one’s cause, that is, doing what one is required to efficiently and to the best of one’s abilities

Nyay – Have justice behind every action and decision one makes.

Prem – Compassions towards everything in this universe.

Dhairya – This comes from strengthening our sense of right and wrong such that one can withstand any randomness, entropy, risk etc. either from inside or from outside.

Nassim Nicholas Taleb speaks at length about these attributes in his recent book “Antifragile”.

The books of economics speak about rules that one needs to follow to become economically smart but our ancient wisdom speaks about principles. So if we were to live by these principles, then the nuts and bolts would automatically fit. We shall show the world new rules of economics just by our actions that emanate from such principles. Yet again.

So we end this piece asking a few questions to ponder over:

• Isn’t it true that if something has lasted for centuries will continue to do so when compared to new books of thoughts?
• Isn’t it true that our philosophy is simple and can be followed by anyone
• Why don’t we dare to think like Indians and not be afraid to be different from the world?
• Why can’t we challenge the status quo and also show light to the world. 

It is high time we regain our identity and work towards our nation’s prosperity. Some may call it Ram Rajya, or some may call it Incredible India. The point is, we have to just THINK like Indians.

Social Media Buzz on Life Insurance versus Equities

This article was first published in the IIB Bulletin, 2014, Vol. 1, Iss. 1, pp-10-11; Co-author: Anish Jain, Quadrisk Advisors
https://iib.gov.in/IRDA/Articles/IIB%20Bulletin%20Q1%202014-15.pdf

As Thomas H. Davenport and Jeanne G. Harris put it in their book “Competing on Analytics”, Analytics is the new science of winning. Harping on the virtues of Analytics would be a wasteful exercise. People are sold on the idea.

Heavy duty analytics was deployed to locate the MH370. Big data analytics was at play to effectively devise disaster management plan when hurricane Sandy hit America. Application of Analytics to retain and reward customers, design products and market them is widely in use. Banks and financial services firms use fraud analytics, social media analysis and text analytics effectively to reduce costs and improve efficiency.

The advent of Facebook, Twitter and LinkedIn has revolutionized the  the behavior of people in many spheres of lives Barrack Obama won the Presidential elections for the second term in 2012 and social media campaigning was an integral part of his overall campaign strategy. He is even called the “first social media president”! Indian political parties have been deploying social media effectively to campaign for the ongoing elections.

The impact of social media has been more significant in the field of marketing. Before buying a mobile phone, most people do research and read reviews on the internet. Similar behavior extends to other kinds of purchases including a house, car, electronics goods, books and even financial products like stocks and insurance.

Due to changes in behavior of a customer, companies have changed their marketing strategies with increase focus on social media. There is a focus to increase presence on the web, engage directly with end customers through social media and manage any adverse feedback quickly and effectively.  Social media can be used as a powerful tool to marketing, customer servicing and maintaining public relations

The significance of social media prompted us to carry out a study on the visibility of ‘Life Insurance’ on social media.

Life Insurance forms 16% of the total financial savings of Indian households. Only 3% of the savings are invested in the capital markets.

Compositing of Savings in Financial Assets of Indian Households

Source: Reserve Bank of India, 2012-13          

The Life Insurance industry has seen a gradual decline in various key parameters over the last three years.

Key parameters in relation to the Life Insurance Industry in India

Indian Life Insurance Industry	2010-11	2011-12	2012-13	Trend
Share in Global Life Insurance Market	2.69%	2.30%	2.03%	Decreasing
Life Insurance Penetration	4.40%	3.40%	3.17%	Decreasing
Life Insurance Density	55.7 USD	49 USD	42.7 USD	Decreasing
Life Insurance Premium (in Rs.)	2.92 lakh crores	2.87 lakh crores	2.87 lakh crores	Decreasing
New Life Insurance Policies Issued	481.52 lakhs	441.93 lakhs	441.87 lakhs	Decreasing

Source : IRDA Annual Report 2011-12, 2012-13; Swiss Re, Sigma No. 3/2013

While there are numerous reasons which have contributed the decline, how does life insurance perform in terms of their presence on social media?

For the purpose of this study, social media monitoring tool Opinion Tracker was used. We tracked Web News, Social Networks (excluding Twitter) and Blogs. We compare the presence of life insurance on social media, with the stock market, for a 3-month period (29/12/2013 to 29/03/2014). Is the flow of savings into Life Insurance and stock markets proportional to their presence on the social media?

The key words used for the study were Insurance, Life Insurance, IRDA, Indemnity, Life coverage, Tax savings 80c Life Insurance, and names of various Life Insurance companies in India, to get the count for the ‘Life Insurance’ presence. Words like Nifty, Sensex, Equity, Stock, BSE, NSE and SEBI were used for finding the presence of ‘Stock Market’ on social media.

While the results can be influenced by the period of study, the use of different key words from what we have used, and other industry related reasons, the results that we got were quite astonishing, even accounting for all the different scenarios which could result in different numbers from what we have.

	Life Insurance	Stock Market
Total Posts	6562	211966
Web News	6514	210456
Blogs	46	1373
Social Network	2	137
Maximum Posts in a day	139 (on 14/03/14)	3648 (on 20/02/14)
Minimum Posts in a day	16 (on 23/03/14)	599 (on 26/01/14)

The results shows despite so much of social media buzz for Stock Market, people prefer to invest their savings in Life Insurance. It clearly shows the tendency of Indian people to save and their risk-averse attitude. But, we would like to implore the readers to think for a moment, the kind of funds that can flow into Life Insurance market, if they upped their presence on social media!

Life insurance companies do not make much use of social media. The Life Insurance companies still rely on their agency force to spread awareness about the products. This claim is also supported by a recent survey published by Max Life Insurance-Nielsen, where 58% respondents said that Insurance awareness is generated by agents, while only 8% respondents believed that the awareness is generated by internet. They need to realize that Social Media has rapidly turned into a vital part of the modern marketing mix as well as the lives of at least the urban customers (existing or potential). A few benefits of using social media would be:

  Ø  Incomparable reach. Would help the companies explore untouched markets and reach potential customers directly without middlemen

Ø  Interact with numerous people, making them their potential customer and eventually resulting in sales.

Ø  Opportunity to showcase brand and products.

Ø  Develop a loyal community of prospects.

Ø  Enhance company trustworthiness.

Ø  Cut marketing costs.

Ø  Directly interact with customers to know their grievances and preferences

A dedicated team to spread awareness about the need for life insurance, the right cover, the products, and to engage consistently with customers would help the Life Insurance Companies to achieve growth in their business.