BFSI sector often considered Barometer of the economy: Pankaj Gupta

Before COVID-19 struck, HDFC Life revealed data from their Life Freedom Index for FY2020. According to the survey participants from Metro, Tier I and Tier II cities, an individual’s confidence towards achieving financial planning goals in the future was not affected by macro-economic factors.

In conversation with Adgully, Pankaj Gupta, Senior Executive Vice-President (Sales) & Chief Marketing Officer, HDFC Life, speaks about how despite COVID-19 tanking the economy, awareness of financial planning products have seen an uptake.

What has been the impact of COVID-19 on the BFSI sector and on HDFC Life?

There has been an undeniable social, cultural, and economic impact of the pandemic, as most activities came to a sudden halt with lockdown. Both the demand for goods and services, and their supply, has got impacted. A large part of the population has seen their income and livelihood getting affected. Many businesses, particularly the smaller ones, have seen this impact as well.

BFSI sector is often considered the barometer of the economy and accordingly could not have been left un-spared. One of the immediate impacts is due to the moratorium on repayment of loans that has been extended to the borrowers. This was the need of the hour, given the massive disruption in the economy. Liquidity is thus expected to remain tight. The cost of borrowing in real terms may see an increase, due to the perception of higher risk, linked to lower economic activity, and possible impact on repayment behaviour.

From a consumer perspective, their priorities have seen an immediate change. Some of the shift may be short term, but other changes may persist for longer and even forever. Consumption pattern of goods and services, as well as the channels used to access goods and services, will see changes. One of the key shifts would be towards higher digitisation, as consumers ask for and get comfortable with, and providers transform their mechanisms to meet the demands digitally. Our infrastructure on digital, including Telecom has largely been able to cope with the sudden, huge increase in bandwidth requirement. Regulators and other stakeholders in the ecosystem have also responded positively to enable digitisation.

Even as these shifts take place, customer need for savings and protection solutions from the life insurance industry have largely remained intact. Our primary and secondary research indicates that very few customers will postpone their purchase of such solutions for long. As the economy starts reopening, transaction flow will start as well, as the fundamental need remains. And has become even more salient.

While it might take some more time for things to settle down and a new normal to emerge, we believe that the structural story for life insurance remains intact and we expect business to emerge stronger at the end of this pandemic. Life insurance is a long-term industry and we need to look at the impact on a longer-term basis, and that longer-term demand remains strong.

How has this scenario impacted consumer awareness and consideration of financial planning products?

The pandemic has impacted customer behavior in a way that, on an immediate basis, there is more emphasis on preserving cash for exigencies. However, there has been an increase in the awareness about life insurance as an essential solution, especially from the perspective of pure protection. This could in a way change consumer perception of life insurance and make the solution more salient. There is greater understanding of the importance of risk-cover in overall financial planning. This in turn will aid the overall penetration of the product category across the country.

There could also be the development of new customer segments that want to access life insurance solutions with lower ticket sizes. This in turn could offer an opportunity to life insurers for introducing bite-sized (or smaller, sachet-sized) products that can further help unlock the potential of our under-penetrated market.

HDFC Life created a life insurance property (LFI) in 2011. What is the idea behind establishing this property?

The Life Freedom Index (LFI) report by HDFC Life gives insights on the perception of Urban Indians about their current and future financial aspects. It is based on their own financial planning, discipline in adhering to the plan and their perception towards its sufficiency to enable them to live life with dignity. The report highlights the overall psychological feeling of financial freedom and security of individuals. The insights on their habits and psychology across customer segments help us to offer relevant products and services.

What, according to you, are the key highlights from the Life Freedom Index survey? How to fill in the gap in different cities, towns?

The latest Life Freedom Index (LFI) is at 66.6, an improvement of 8.7 points in comparison to the previous exercise done in 2016. Considering the segment studied is urban consumers, we believe it is still a low number. However, it indicates that the financial freedom of urban consumers continues to be on the rise, on the back of growing awareness about available products, as well as the sufficiency and adequacy of financial planning.

The study was broken into four segments comprising Proud Parents, Smart Women, Young Aspirants and Wisdom Investors. Proud Parents’ primary priority is their children (80%). Spouse at 44% and Parents at 38% are their other key priorities. Smart Women prioritize physical and mental fitness (50%) along with their child’s needs. Young Aspirants focus on short term goals such as improving lifestyle (49%), or starting their own business (36%).  Wisdom Investors prioritize long-term goals such as child’s future (74%) and their own retirement (37%) and health (44%) planning.

At 69 points, the LFI for Metro cities showed an increase of 11.4 points over 2016, with the index for Tier I cities showing an increase of 5.6 points, to touch 64.6. Tier II cities were seen to have a lower LFI score of 61.4, primarily owing to lower Financial Awareness and Financial Liberty. When it comes to smaller towns, their awareness as well as planning for critical life events is significantly lower, which overall makes their residents more vulnerable and thus, impacts their psychological feeling of being financially free. People in Tier 2 cities need to be further educated about the importance of a robust financial plan to meet their life milestones, which will enable them to be more financially secure.

Marketing budgets are among the first to be slashed during an economic crunch. What is your view on the role of marketing during such a crisis?

This is the first time in several decades that the world has witnessed such a level of disruption, one that has impacted so many countries so severely, simultaneously. At the moment, we are still witnessing the pandemic as it unfolds and hence, it would be difficult to assess all the potential ramifications.

I believe marketing plays a critical role in an organization across economic cycles. With consumers adapting to the new normal and face-to-face interactions being minimal for the next few months, brands need to find new and relevant ways to communicate with their target audience and be on top of their mind. Combining one's core offering with a purpose driven approach and turning every interaction to a meaningful one would be the biggest role for marketers during this time. Also, this will be a time where consumers would value interactions that help build long term trust rather than just selling products.

So, the critical role that marketing plays in an organisation continues even during the current situation.

What can BFSI brands do to create relevance for the consumer in these tough times?

Research reports show that consumers are proactively looking to understand and manage their financial situation better. Since some of us are working from home and may have a few additional hours to spare, BFSI brands should leverage this opportunity to connect with consumers to make sure that their understanding of financial offerings is better, and also to enable them to plan for a secure future by being able to act on their understanding of needs.

At HDFC Life, we have taken multiple initiatives to enable our consumers to be ready and prepared to bounce back from this situation. From conducting expert Life Sessions around topics like health, family, finance, to enabling our customers and sales teams to digitally interact and transact effectively, we have endeavored to make their life easier even during these times.

What do you believe is the best media mix to reach and communicate the brand message during this period?

To a large extent the media mix would depend on the message and the audience one wishes to communicate with. However, broadly speaking, both Television and Digital have seen significant growth during this period. News, entertainment and gaming in particular have seen big gains. On the digital front, it’s not just content. Indians are also transacting more online, given the lockdown induced compulsion, as well as the increasingly convenient digital access.

Lastly, mobile, messaging, and social media continue to play their unique role. This crisis has increased the time spent on smart phones further. So, a multi-media, multi-screen approach should ideally feature in one’s media strategy.

The impact of COVID-19 has transformed sectors and made them adopt ‘contactless’ technologies. Do BFSI brands have to adopt change and transform as well?

Yes, certainly, this pandemic has not only impacted our customers and businesses but also our entire way of life. Due to this, every business, every sector, every category across the globe has to dramatically change its way of doing business and adapt to the prevailing conditions, and keep evolving.

Take India for instance, where the lockdown has been in effect for several weeks now. Organisations have now increasingly understood that digital is a powerful medium of doing business, and not just another tool for communication. Brands like us, who saw this opportunity many years ago and developed a digital ecosystem, have been able to continue servicing our customers’ needs even during the lockdown. We have enabled 24*7 digital customer touch points to ensure our customers can reach us at all times. Companies that didn’t believe in digital as much are now trying to quickly create a working digital model.

Please share your observations on new financial habits and trends during the lockdown?

In general, much of the discretionary spending has come down for households and there has been some trend towards an increasingly conservative approach to spending.

In difficult times, people do analyse their portfolio, and fine-tune financial goals and also align to long-term thinking, with emphasis on protection, liquidity and savings. While consumers are also slightly risk averse and may postpone taking large financial decisions at the moment, demand for health and life insurance should witness a pull in the market, as witnessed in similar conditions in the past and as per the trends observed globally even in the current pandemic.

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