The significance of a phygital model to achieve last mile insurance penetration
India, with its vast population and diverse cultural and geographical backgrounds, faces significant challenges when it comes to insurance penetration. Despite the government’s efforts to extend insurance coverage to remote areas, there are still large gaps in access to insurance. According to a report by the Insurance Regulatory and Development Authority of India (IRDAI), the penetration of life insurance in India was only 4.2% in 2022, while the non-life insurance penetration was even lower at 1%. This lack of coverage leaves millions of Indians vulnerable to financial risks and uncertainty.
However, there is a growing trend in the insurance industry that is addressing this issue – the phygital model. The term “phygital” is derived from the combination of “physical” and “digital.” The phygital model combines the convenience of digital platforms with the personal touch of physical interactions to create a hybrid experience for customers. By leveraging technology and physical infrastructure, insurers can provide insurance coverage to even the most remote areas of the country.
The phygital model is significant for insurance penetration in India because it overcomes the challenges posed by traditional insurance models. In the past, insurers relied solely on agents and branch networks to sell their products. However, this approach had limitations in terms of reach and accessibility. The cost of setting up branches and training agents in remote areas was often too high, making it difficult to extend insurance coverage to these areas. Additionally, customers in remote areas had limited access to physical offices, making it challenging to purchase insurance or seek assistance.
The phygital model addresses these issues by using digital platforms to reach customers in remote areas and physical offices or agents to provide personalized assistance. With the widespread adoption of smartphones and internet connectivity, digital platforms have become a powerful tool to engage customers and offer them convenient access to insurance products. Customers can compare products, get quotes, and purchase insurance policies from the comfort of their own homes. This convenience is especially important for customers in remote areas who may not have easy access to physical offices or face challenges in transportation.
Furthermore, physical offices or agents play a crucial role in the phygital model by providing personalized assistance to customers. They can help customers understand the intricacies of insurance products, clarify doubts, and guide them through the application and claims process. This human touch adds a sense of trust and reliability, which is particularly important in an industry where customers often seek expert advice and reassurance.
Another advantage of the phygital model is that it allows insurers to collect and analyse data on customer behavior and preferences. With digital platforms, insurers can gather valuable insights into customer demographics, preferences, and buying behavior. This data can be used to develop more targeted and relevant insurance products. For example, insurers can use data on customer demographics and buying behavior to design products that are tailored to specific customer segments. This approach increases the relevance of insurance products and can lead to higher customer satisfaction.
In recent years, several insurance companies in India have adopted the phygital model to improve their reach and penetration. Customers can buy insurance policies from the comfort of their homes, while still having access to physical offices and agents in remote areas.
In conclusion, the phygital model presents a promising solution to India’s insurance penetration challenges. By leveraging technology and physical infrastructure, insurers can extend coverage to remote areas and provide a convenient, personalized experience for customers.