I acknowledge that it is actually a little too early to make a detailed assessment of the impact of the Corona Virus on the life insurance business. The full economic impact of the virus is not known as of yet. But one thing is clear, you can forget the way you did business in the past years. Financial year 2020-21 is going to be way different, very different. You therefore need to prepare yourself in a different way.

What is the global economic scenario?

The 8th April 2020 daily Newsletter of the Economist has this to say: With countries in lock down accounting for over 50% of global GDP, the collapse in commercial activity is far more severe than in previous recessions. Numerous indicators suggest extreme stress. Global oil demand has dropped by up to a third; the volume of new cars and parts shipped on America’s railways has dropped by 70%. Many firms have only enough inventories and cash to survive for three to six months. Just imagine, the global demand for oil (at a price today that is 25 % of what the price was 2 months ago) is only 2/3 of the earlier demand!

What about India?

The Center for Monitoring Indian Economy (CMIE) collects data on various aspects of the Indian economy on a regular basis. The CMIE has indicated that the unemployment rate in India has risen from 8.4 % in mid-March to 23 % by 5th April, 2020. In about 3 weeks the rate of unemployment has increased nearly 3 times!

The International Labour Organisation (ILO), (as reported in Mint, 8 April, 2020) says that 400 million people employed (in India) in the informal sector (that is those without a proper salaried job), face the risk of falling deeper into poverty.

How will the Indian economy shape up in the near future?

This is largely not assessed as yet. But initial trends suggest that it will be a few years, before anything called normalcy will return. But the following conditions are clear.

The Labour market will be under stress

As of date, most of the nearly 100 million migrant workers have either gone home or want to go back home at the earliest opportunity. The labour force that works the farms, petty services in towns, many of the infrastructure projects and in many factories, will not be available in the near future. They would be reluctant to return to their previous jobs.

The factories will be under stress

The supply chains of factories that have been disrupted because of the lock down will take a long time to become adequately operational. Each factory is dependent on raw material supplies, on transportation to get the raw materials, and on the banking system to provide the working capital for operations. For factories to start production and keep the production lines going is not going to be easy.

The farm sector will be in stress

The same is the case with the farms. For many decades now, in the main agriculture producing areas of Punjab, Haryana, Gujarat, Kerala, parts of Maharashtra, etc. there has been a dependence on migrant labour as farm hands. Since many of these migrant workers will not be available, there is a question mark of the Kharif harvest during Baisakhi. Undoubtedly the farmers in those states will find a way but it will be sub-optimal, i.e. not as efficient as before.

Life insurance sector will also be under stress

The scenario as it is developing in the economy has serious implications for life insurance sales also. The income of a large and significant proportion of the population is going to be severely affected. Forget having a surplus for savings, they will find it difficult to incur day-to-day living expenses. Only those in government jobs or having secured private sector jobs will be financially comfortable during this period. For this segment also, there is the prospect of inflation eating into their cost of living.

The life insurance sales person has no option but to re-invent and adapt

It is therefore very important for the life insurance sales person to re-invent himself or herself, in order to survive in the coming couple of years. Your ability to adapt to changing circumstances will be crucial for survival. Life is not going to be same, as it was before the virus attack. Only those with a well thought out strategy and an actionable plan will continue to be in the business of life insurance selling.

For the first time in history recession will effect life insurance business in India

In the financial year 2020-21, life insurance business, perhaps for the first time in India, is going to see a significant drop. For the life insurance sales person, this financial year is going to be like no other. So agents, development officers, branch officials and division officials, and others should pull up their socks and get down to serious brain storming on what needs to be done and how.

But the need for life insurance is more important than ever

Even though the economy is on a downhill path, the need for life insurance has not reduced. If anything, the need for life insurance is all the more. So let us put our heads together on how to face and overcome this challenge.

Let us put our hands together

If you have any insights on how to tackle this market condition please share it in the comments column below. Keep tuned in to this Blog for tips on how to work out your strategies for this market situation. We sell risks not returns, the market is ripe for selling risks, as your customers get to see the full and practical meaning of risks in life. I will be writing many articles on this point in the near future.

Stay Tuned! And remember we

Sell Risks not Returns