Rising GDP, untapped household savings and dormant/quiescent HNI wealth in B-15 cities offer new business potential for financial services companies: KPMG in India – CII report ‘Distribution Disrupted’
Product innovation, a digital strategy and an enhanced distribution channel are some of
the key themes for the product manufacturers to reach the desired penetration
Total premium of the overall insurance industry in India (Life and Non-Life
combined) is projected to reach INR26 Trillion by 2020
Mumbai, 28 November 2016: KPMG in India and Confederation of Indian Industry (CII) unveiled a
report titled ‘Distribution Disrupted’ at the 5th CII Financial Distribution Summit, 2016, which
recognises the critical role of the distributor community who can be instrumental in building a
strong force of distributors to add a billion investors to the Indian financial markets.
The report unravels the current market potential for financial products in India with a spotlight on
the Indian financial distribution ecosystem, along with its pertinent challenges and methodologies
amidst evolving technology and regulation. It recognises the fact that with increased financial
inclusion and having savings rates on the higher side across the world, India today has significant
potential to create wealth by channelising savings to bank deposits, insurance products and
investments in mutual funds. Voicing the theme of the summit in its findings, there is a need for
building a zillion distributor workforce to tap the underpenetrated financial distribution markets
in the country.
“It is good to see that, over the past few years, there has been a shift from pushing products to
enhancing customer experience amongst product manufacturers. There is a lot of scope for
financial product consumption in India given the size of its population, it has to be strongly
supported by a sound lateral distribution base”, said V Ganesh, Chairman, CII Financial
Distribution Summit and CEO, Karvy Computershare Pvt. Ltd.
As per the report, GDP, untapped household savings and dormant/quiescent HNI wealth in B-15
cities offer new business potential for financial services companies. According to industry experts
and market analysts, the insurance industry in India will witness a record growth in terms of
market size, penetration rates, new business income and similar growth statistics by 2020.
The report estimates that the total premium of the overall insurance industry in India (Life and
Non-Life combined) is projected to reach the INR26 Trillion by 2020. However, experts suggest
that this transition towards Vision 2020 has to be supported by an equally significant rise in the
number of intermediaries involved in the distribution of insurance, mainly individual agents, and
corporate agencies (including banks).
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“The profile of an Indian investor is diverse; ranging from being unaware to tech-savvy when using
financial products such as insurance, mutual funds and pension with a majority of addressable
investors needing trustworthy consultative advice on a continuous basis. It is imperative for the
players to cater to the changing investor needs and tap excluded segments through a channel of
zillion distributors with a judicious mix of people and technology to be able to add a billion
investors to the Indian financial markets,” said Naresh Makhijani, Partner and Head, Financial
Services, KPMG in India.
Key findings presented in the report are:
India is yet to traverse the path of insurance distribution through extensive use of digital
channels. With Penetration – Premium as a percentage of GDP at 2.6 per cent for life insurance
and 0.7 per cent for non-life insurance, there is huge untapped potential in the Indian market. The
emergence of aggregators, implementing mandatory e-insurance for ease of access, investor
empowerment and simplification of KYC procedures is just the beginning of the change that needs
to be incurred to tap the underpenetrated population of India. To address the challenge of
penetration, insurers need to focus on: Redesigning the channel strategy and financial awareness
of the customer and channel partners insurance landscape.
The Assets Under Management (AUM) in the mutual fund industry have seen significant growth in
the last few years. The growth is likely to continue over the next four to five years. However,
despite this growth, mutual fund penetration i.e. Mutual Fund AUM / GDP ratio of India is very
low at 7 per cent as compared to USA which is at 83 per cent and the world average of 37 per
Banks remain a key category due to their ability to leverage the existing distribution structure.
Large bank distributors are supported by 200-300 RMs to source their AUM sales. Additionally,
banks are initiating digital platforms to enable and promote online sales.
Pension fund in India is still in nascent stages of maturity. Some of the key factors impacting the
growth of employee pensions in India are litigations on contribution base, lack of portability of
accumulated corpus, disparity for self-employed, pre-retirement withdrawals.
New fintech players are entering the distribution market with solid technology solutions and are
taking the business away from traditional distributors. Gen Y and Gen Z users are highly
influenced by these players and are starting their first investments through these distributors. The
technology platform created by them is self-sufficient to carry out all required transactions and
view different reports, including a well-designed portfolio.
“Fintech is helping product manufacturers bridge the gap between overall customer expectation
and customer experience. To achieve a high degree of financial product penetration, the
distribution strategy has to be multi-dimensional in nature, creating a lucrative situation for all the
involved stakeholders. Product manufacturers continue to adapt and change their strategy and
form effective alliances with distributors; to garner higher market share and become the
preferred choice,” said Harshvardhan Bisht, Partner, Management Consulting, KPMG in India.
Summarising the current scenario in which the financial services companies operate, the report
suggests that India is at the cusp of growth with the economy bouncing back and a rise in youth
population with an affinity for technology. This provides a myriad opportunities for mutual funds
and insurance companies to cater to a wider investor base with innovation in the way they cater
to the customer needs.
Thus, product innovation, a digital strategy and an enhanced distribution channel are some of the
key themes for the product manufacturers to reach the desired penetration. Regulatory impetus
and the efforts from financial services firms to empower investors and bringing in the element of
trust are expected to yield a better connect in the near future.
Technology disruptors, new players and traditional channels will have to work together towards
bringing in trust from customers and educating them of the immense potential for wealth
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