Peter Drucker said “The fear of dying soon made life insurance the largest financial service of the 19th century. But providing financial protection against the risk of not dying soon enough may become the 21st century’s leading industry.” After the establishment of insurance market for years in India, one of the biggest challenges in front of Insurance industry is consumers’ perception about insurance as a vehicle to accumulate wealth and improve personal finances due to the tax benefits attached to it instead of Risk cover. Covering risk is the basis of any insurance, other benefits are just add on.
Its because of this perception of the market even insurers are looking for huge business figures during JFM every year and they know the business would be down in Q1 of the financial year.
The other challenges lies within the gap between the real situation and the basic requisites of insurance business, like –
- Lack of trained professionals
- Lack of proper product distribution
- Poor fund management
- Pressure between underwriters and sales team
- Unavailability of database
- Need of product innovations: Flexible or need based Vs Standard
- Branding
I read in some magazine that Insurance market in India has grown at a CAGR of over 20% in last six years, but the insurance penetration and density is still very low compared to the world averages. Insurance business in India is yet dominated by tied agent force whereas new distribution channels like Banks, Brokers and Internet are still struggling to get their market share.
Life Insurance product offers two solutions – Life cover and Investment. If we segregate these two offers, we find that the average return which an insured gets vary from 6-7% (this is way below standard debt fund).
In real circumstances, we find many instances where today the most dominated channel is misleading a customer, knowingly or unknowingly. The members in agency channels are known as Advisors but most of them yet act as agents only, they prefer to sell the product which gives them more commission instead what suits the need of the consumer.
I believe the important areas where the Insurance market should focus are at present:
- Branding: to develop the true perception of insurance in custom
er’s mindset. For instance, in January, Aegon Religare launched a teaser campaign using radio, TV and outdoor campaigns questioning people, 'Kya aapko K.I.L.B. hai?' (Do you have K.I.L.B. - 'Kum Insurance Lene Ki Bimari’). - Insurance companies should understand the needs of consumers and develope flexible products.
